Target’s (NYSE:TGT) sales and financial performance have slipped in recent months. Target reported that its second-quarter earnings fell 9.7 percent to $680 million. Adjusted earnings per share totaled $1.23, topping Wall Street’s expectations by 11 cents a share. The retailer said it earned $16.17 billion in revenue in the fiscal second quarter. Analysts had expected Target to report $16.18 billion in revenue. In last year’s second quarter, Target earned $1.22 a share on sales of $17.43 billion.
Sales fell 7.2 percent to $16.2 billion, meeting analysts’ estimates. Sales at stores open at least a year fell 1.1 percent. It was the first time the metric was negative since the first quarter of 2014. Comparable digital channel sales grew 16 percent. That compares with a 23 percent lift in digital sales in the first quarter and a 30 percent gain in the prior-year period. Only about 4 percent of Target’s sales come from digital.
Target also lowered its sales estimate for the rest of the year during its earnings call. For both the third and fourth quarters of 2016, Target now expects a year-over-year same-store sales change of between -2 percent to 0 percent. Target now estimates adjusted per-share earnings for all of 2016 will be in the range of $4.80 to $5.20. That’s lower than its prior guidance of $5.20 to $5.40. For the third quarter, adjusted per-share earnings will be in the range of 75 cents to 95 cents, it said. Wall Street forecast 95 cents, according to Thomson Reuters.
Target has been focused on streamlining operations and remaking itself as a one-stop shop retailer. The retailer has also been eyeing upgrades to its grocery business and prioritizing certain high-demand merchandise categories. In the fiscal second quarter, sales in those categories, which include style, baby, kids and wellness, outpaced the total business by 3 percentage points. The retailer is also opening smaller stores in densely populated markets such as Chicago, Manhattan, and Philadelphia.
Target planned to cut expenses by $2 billion in the 2-year period ending in 2016. The company is currently on pace to exceed that goal. Last year, the company shut down all 133 of its stores in Canada, laying off its entire Canadian workforce. Target also sold its pharmacy business to CVS for $1.9 billion in June 2015. The company announced plans to cut another 1,700 jobs in March 2015.