Boston, MA 05/27/2014 (wallstreetpr) – Target Corporation (NYSE:TGT) reported the first quarter result for the year 2014 with total sales of $17 billion (+2.1%) and net earnings of $418 million with diluted EPS of $0.66. The financial performances were in line with the expectation, which reflected by the recovery from the Canada operation and data breach related costs. But, the adjusted EPS were down by 13.9% to $0.70 compared to $0.82 in 1Q2013.
U.S. segment – Yet to recover
In 1Q2014, the U.S. sales were marginally up (0.2%) to $16.7 billion due to the contribution of new stores that partly offset the 0.3% decline in sales from comparable stores. Gross margin for the period was 29.5% compared to 30.7% in 1Q2013. The decreasing gross profit reduced the segment’s EBITDA by 8.5% to $1.6 billion from $1.7 billion. As a result, the segment EBITDA margin decreased to 9.5% (1Q2013: 10.4%) as well as EBIT margin to 6.4% (1Q2013: 7.5%).
Canadian segment – Increase margin pressure
Target Corporation (NYSE:TGT) opened 24 Canadian stores during the 1Q2014 that raised the Canadian segment sales to $393 million from $86 million a year ego. However, it failed to maintain its gross margin that reduced to 18.7% from 38.4% due to the continued effect to clear the excess inventory. In addition, the increasing SG&A costs further reduced the segment EBITDA to negative $144 million and segment EBIT to a negative $211 million.
Capital Returned to Shareholders
In 1Q2014, Target generated lower cash inflows $520 million from its operation and used $561 million as capital expenditures towards the opening of new stores. But, the retailer did not repurchase shares and distributed cash of $272 million as dividend, which represents 65% of the Company’s net earnings.
Expects earnings growth
Target intends profitable growth momentum, therefore, it made some changes in the management and incorporated additional funds to drive the U.S. sales and improvement in Canada.
Subsequent to this, Target Corporation (NYSE:TGT) also considered the uncertain expenses and updated its guidance for the year 2014. It expects adjusted EPS of $0.85 to $1.00 in the second quarter of 2014 and $3.60 to $3.90 in FY2014.
