Target Corp., struggling to rebound from last year's hacker attack and a botched Canadian expansion, posted first-quarter profit that missed analysts' estimates and cut its annual forecast.
Net income fell 16% to $418 million, or 66 cents a share, from $498 million, or 77 cents, a year earlier, the Minneapolis company said Wednesday. Analysts had projected 71 cents on average, according to data compiled by Bloomberg. Still, same-store sales didn't decline as much as predicted, signaling to investors that a comeback may be underway.
Target is trying to regain its footing as it searches for a new chief executive, revamps its Canadian division and copes with the theft of 40 million payment-card numbers by hackers. The second-largest U.S. discount retailer appointed John Mulligan as interim CEO this month and Tuesday named Mark Schindele as the new top executive for Canada.
"It's too early to start playing the recovery theme of Target," said Paul Trussell, an analyst for Deutsche Bank.
Sales rose 2.1% to about $17 billion last quarter, in line with estimates. Although U.S. same-store sales dropped 0.3%, that was better than the 1.1% decline analysts had projected. Same-store sales are a key measure of retailer health.
Target shares rose 59 cents, or 1%, to $57.20. They have fallen 9.6% this year. That compares with a 2.1% increase for the Standard & Poor's 500 Index.
"Sales were better than everyone thought," said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis. Still, Target probably had to use promotions and discounts to hit those numbers, harming profit margins, he said.
Target cut its annual earnings forecast to $3.60 to $3.90 a share, down from a previous range of as much as $4.15 a share. It projected adjusted earnings of 85 cents to $1 a share for the second quarter, compared with an average estimate of about $1.03.