Target Indicates Possible Turnaround, Discounting Hurts Forecast

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Target Indicates Possible Turnaround, Discounting Hurts Forecast

Target Corp posted a 16% fall in profit for the first three months this year, but demonstrated improvements in its attempts to woo customers’ trust after the high-profile theft of customer information and collapsed expansion into Canada.

Target has already sacked its chief executive and the head of its Canadian venture in efforts to recover. The retailer posted on Wednesday a 0.3% tumble in US same-store sales. Analysts had projected a flop of 1.1%, Reuters reported.

Target shares were unmoved at midday, highlighting prevalent concerns over the retailer’s outlook as it is forced to sale goods at discounted prices to woo customers back and tries to accomplish the uphill task of getting back on track its Canada expansion plans.

“It could have been worse is the general refrain… It was not the disaster that was feared,” said analyst David Strasser of Janney Capital Markets.

The company reported that the number of customers who visited its stores soared dramatically compared with statistics from towards the end of the fourth quarter.

However, traffic in US stores plunged more than 2% in the quarter and sales grew just 2.1% to $17.05 billion, a little higher than analysts’ outlook.

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An investment firm analyst Brian Yarbrough said he believed the price discounts, which have narrowed gross margins by more than a percentage point in the first three months of 2014, would continue through the end of the year, when the retailer could start seeing growth in customer traffic.

Interim Chief Executive John Mulligan told reporters that traffic grew in February and March, overcoming bad weather that rivals have blamed for poor sales.

“While we are pleased with this momentum, we need to move more quickly,” Mulligan is quoted by the Motley Fool as saying.

Target adjusted downwards its full-year profit outlook to the range of $3.60-$3.90 a share from $3.85-$4.15, making provision for price discounts and capital injections into e-commerce.

To contact the reporter of the story: Yashu Gola at yashu@forexminute.com

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