Target warns on profit as sales stay "essentially flat"
By Siddharth Cavale
(Reuters) - Target Corp (TGT.N: Quote) cut its second-quarter profit estimate as it resorts to price cuts to attract cash-strapped consumers and win back customers unnerved by a huge holiday-season data breach.
The warning on Tuesday showed that new Chief Executive Brian Cornell, who takes over the third-largest U.S. retailer next week, has his work cut out for him.
"The new boss ... inherits a fine mess," Carol Levenson, director of research at Gimme Credit, an independent corporate bond research service, said in a note.
Sales at U.S. mass merchandisers such as Target and Wal-Mart Stores Inc (WMT.N: Quote) have been hit as consumers struggling with stagnant wages and higher taxes cut back on spending.
But Target faces the additional task of rebuilding its reputation after a data breach resulted in the theft of 40 million payment card numbers and 70 million other pieces of customer data such as email addresses and phone numbers.
Target, whose shares were down 4.18 percent at $58.19 in afternoon trading, said same-store sales in the United States were "essentially flat" in the second quarter ended July.
"The core mass merchandisers are all struggling and Target is struggling with the rest of them," Edward Jones analyst Brian Yarbrough told Reuters.
"But it is a little bit concerning that though they have pushed the lever on promotional spending it is still not driving traffic," he said. Continued...