Target’s holiday 2013 data breach is still dragging down earnings there. The company, which said it has spent $129 million so far on breach-related expenses, reported a 61.7 percent drop in net income for the second quarter, versus a year ago. Second-quarter same-store sales slid by 1.3 percent. The company has lowered its full-year profit outlook. But Target executives say traffic trends are turning around at U.S. stores and that they expect same-store sales growth to be in the range of “flat to 1 percent” for the full year.
“Target continues to struggle with retailing basics — right product, right time, right place — in both its U.S. and Canadian divisions,” said Kelly Tackett, U.S. research director at consulting firm Planet Retail. “In its home market, improving store-level execution and delivering newness and excitement in marketing and merchandising must be top of the to-do list for new CEO Brian Cornell.”
In a town hall event at Target’s Minneapolis headquarters last week, Cornell addressed employees for the first time, telling them that style innovation would help bring the company out of the doldrums. “The days of mass communication and mass marketing are behind us,” he said in a conversation relayed to outsiders through the company’s Twitter feed. “Today is about personalization.”
Cornell needs to deliver strategies for small-box expansion and omni-channel sales, both of these being areas where competition is intensifying and Target remains a laggard, Tackett says. Visits to Target’s mobile-commerce site increased by 50 percent year on year in the second quarter, helping drive a 30 percent increase in overall digital sales, according to the company.
“Although ultimately surmountable, the problems Target faces in returning to comp-store sales growth in the U.S. and saving its Canadian operations aren’t ones with easy fixes,” Tackett said. “Expect several more tough quarters before we begin to catch glimpses of the Target of tomorrow.”