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Target Corp.’s turnaround is taking time as the discount giant contends with changes both within and without.
Not only is the company dealing with consumer and supply chain uncertainty from U.S. President Donald Trump’s start and stop trade war, but it has also been reorganizing — an effort that has now been stepped up. A “multiyear Enterprise Acceleration Office to drive even greater speed and agility” is being established under chief operating officer Michael Fiddelke and Christina Hennington, chief strategy and growth officer, who is shifting to an advisory role and leaving the company in September.
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Meanwhile, first-quarter sales and profits both missed their marks — and the reasons were many.
Brain Cornell, chief executive officer, told reporters on a conference call that, “Headwinds included ongoing pressure in our discretionary business plus five consecutive months of declining consumer competence, tariff uncertainty and the reaction to the updates we shared on belonging in January” when the company shifted away from its diversity, equity and inclusion initiatives.
“While we believe each of these factors played a role in our first-quarter performance, we can’t reliably estimate the impact of each one separately,” Cornell said. “I want to be clear that we’re not satisfied with these results and we’re moving with urgency to navigate through this period of volatility. We’re focused on factors within our control, delivering consistency and reliability and a guest experience that features newness, differentiation and value.”
First-quarter net earnings rose 10 percent to $1 billion, or $2.27 a diluted share, with a boost from litigation settlements. But adjusted EPS of $1.30 came in 35 cents below the $1.65 Wall Street analysts forecast.
Sales fell 2.8 percent to $23.8 billion in the quarter, where analysts were looking for a much milder 0.75 percent decline. Target said merchandise sales were down 3.1 percent and other revenue increased 13.5 percent. On the brighter side, digital comparable sales grew 4.7 percent, powered by a 35 percent growth in same-day delivery and continued expansion in drive-up pick up.
“Looking ahead, we expect current top-line pressures will continue in the near term,” Cornell said. “Our team is working tirelessly to mitigate the impact of tariffs. As we focus on supporting American families in managing their budgets, we have many levers we can use to mitigate this impact and price is the very last resort.”