Friday, November 22, 2013

Target misses earnings with trouble from Canada

Target released its third quarter earnings Thursday November 21st which missed estimates. They reported U.S. and Canadian net earnings at $341 million, 54 cents a share which is down from 96 cents y-o-y. Sales rose 4% y-o-y and total revenue grew 1.9% y-o-y but still fell short of consensus. Gross margins in Canadian operations came in low at 14.8% due to their efforts to clear excess inventory. Target shares closed Thursday at $64.19, down $2.30 or 3.5 percent. Canadian operations reduced Target’s earnings by 29 cents per share due to challenges that are arising from its new stores. Canadians have complained that Targets prices are higher in Canada then they are in the U.S . On top of that Walmart dropped thousands of prices before some of Targets new stores even opened up in Canada. Target still plans on finishing opening a total of 124 stores by the end of 2013 with hope that in the long-term they will be successful. Gregg Steinhafel, CEO, said "As we gain experience in operating Canadian stores and accumulate sales histories by item by location, inventory flow and allocation will become much more reliable and accurate, setting the stage for improved sales and operating efficiency in 2014.” In fourth quarter the Company expects adjusted EPS of $1.50 to $1.60, with the Canadian Segment loss of 22 to 32 cents. For full-year, Target now expects adjusted EPS of $4.59 to $4.69, with the Canadian Segment loss of $0.95 to $1.05. Target is facing many challenges assimilating into Canada culture and in the U.S. where income is stagnates and growth is slow. The reasons that I purposed we should buy into Target are no longer true, therefore, I believe we should sell it. -Kristen Pfaffe

No comments: