Retail chain Target cut its fiscal-year profit outlook on Wednesday after quarterly sales fell more than expected, sending its shares down nearly 5 percent.
Continue Reading Below
The company's sales, like those of rivals, have suffered as shoppers increasingly use online retailers such as Amazon.com Inc and spend on big items like cars and home renovations rather than apparel.
Sales at stores open for at least a year fell 1.1 percent in the second quarter ended July 30, within Target's outlook of flat to down 2 percent. Analysts on average had expected a 1 percent decline, according to research firm Consensus Metrix.
"Based on the current retail environment the company believes it is prudent to lower its expectations for comparable sales in the second half of the year," said the company, the sixth-largest U.S. retailer.
The company said it expected same-store sales to be flat to down 2 percent in the second half of the year and cut its full-year profit forecast to between $4.80 and $5.20 per share from a prior range of $5.20 to $5.40.
The Minneapolis-based retailer's shares were down 4.9 percent at $71.80 in premarket trading. At Tuesday's close, they had risen nearly 4 percent since the start of the year.
Net income attributable to the company fell nearly 10 percent to $680 million, or $1.16 per share, in the second quarter.
Excluding items such as debt retirement losses and the impact of the sale of its pharmacy business to CVS Health, Target earned $1.23 per share. Analysts on average had expected $1.12, according to Thomson Reuters I/B/E/S.
Net sales fell 7.2 percent to $16.17 billion, lagging analysts' expectations of $16.18 billion.
"Although we are planning for a challenging environment in the back half of the year, we believe we have the right strategy to restore traffic and sales growth over time," Chief Executive Officer Brian Cornell said in a statement.
Cornell, Target's CEO since August 2014, has been trying to turn the company around after several years of sluggish growth. Some of his efforts include pulling out of Canada and promoting a narrower set of higher-margin "signature" categories.
The signature categories, including children's, babies' and health and wellness items, outpaced overall comparable sales by 3 percentage points in the second quarter.
Digital sales increased 16 percent, a deceleration from previous quarters, and accounted for 3.3 percent of the company's total.
(Reporting by Siddharth Cavale in Bengaluru and Nandita Bose in Chicago; Editing by Ted Kerr and Lisa Von Ahn)