Target Corp.'s second quarter earnings call Wednesday included some pretty glum news. The Minneapolis-based retailer said its earnings were down about 20 percent compared to the same period a year ago, if one-time expenses and ongoing charges to address its massive data breach last year are excluded.
If those costs are included, the loss is nearly 62 percent, the company said in a news release.
The company took $148 million in charges related to the data breach, it said. Target reported earnings of $234 million, or 37 cents a share for the period, down from $611 million, or 95 cents per share, a year ago.
The adjusted earnings were 78 cents per share, down from 98 cents for the same time last year.
The report also included flat sales growth of 1.7 percent, and results from its Canada stores that were worse than expected, the Business Journal reports.
The rest of the year doesn't look much brighter, either, as Target also lowered its profit outlook for the remaining six months of the fiscal year by about 15 percent.
Despite all that, Target’s shares closed 1 percent higher on Wall Street Wednesday.
So why aren't investors panicking about the bad report? The Business Journal explains there are several factors.
– Target had already issued a warning weeks ago that its quarterly numbers would be bad, so their share price had already taken a hit.
– The earnings report contained some glimmers of good news. Digital sales are up 30 percent compared to the second quarter last year, which the company said is nearly double the industry growth rate. Foot traffic in Target stores was rebounding in June and July, according to company officials.
– Target's new CEO Brian Cornell is just now taking over the reins of the company.
– The company's announcement lowering its profit outlook for the rest of the year is a fairly common strategy, especially when a new CEO takes over, according to an analyst who spoke to the Business Journal. Companies sometimes lower their earnings outlook when a new boss arrives, so down the road they can give credit to the new leadership for beating those lowered expectations, the Business Journal notes.
– Target recently announced plans to turn around its disappointing performance in its Canadian stores, which lost nearly $1 billion last year.
"While results from the quarter didn’t meet our expectations, we are seeing some early signs of progress as we work to improve results in the U.S. and Canada," CFO John Mulligan said in a statement.
The company is also going to extend shopping hours at about half of its stores by at least another hour, so they'll be open until 11 p.m. or midnight, depending on their locations.