In a “choppy” retail environment, Target Corp. delivered better-than-expected results in the first quarter ended April 29, said Brian Cornell, chairman and chief executive officer. The company earned $681 million, equal to $1.23 per share on the common stock, up 8% from $632 million, or $1.06 per share, in the prior-year period. Sales of $16,017 million declined 1.1% from year-ago sales of $16,196 million.
“While we were pleased that our first-quarter financial performance was better than expectations, our results are not where we want them to be, and we have much more work to do,” Mr. Cornell said during a May 17 earnings call with investment analysts. “Week-to-week results have been volatile since Christmas, and overall traffic declined nearly 1% in the first quarter.”
Target is in the early stages of a multi-year effort to position the business for consistent long-term growth. Grocery has become a greater priority for the company, which in recent years added more organic and gluten-free items. In April, the company hired Jeff Burt, a former Kroger executive, to execute the company’s food and beverage strategy as senior vice-president of grocery, fresh food and beverage. Mr. Burt brings 30 years of grocery experience to the role.
“Over the last couple of years, we’ve been very focused on improving the quality of our fresh assortment in food, the work that our merchandising team and our supply chain team have done, we’ve made significant progress in improving freshness, evolving our assortment to ensure we have more organic, natural, gluten-free items in our assortment in each and every category where we participate in food and beverage,” Mr. Cornell said. “Jeff will build off of that work.”
In the recent quarter, some of those prior efforts led to several “bright spots” in Target’s grocery performance, though overall food and beverage comparable sales declined as value and everyday price perception challenged the category, said Mark Tritton, executive vice-president and chief merchandising officer.
“First, we saw a small increase in produce comps in the first quarter, reflecting the work we’ve done to gain credibility in this key part of the assortment,” he said. “We have worked with the produce vendors to reduce the time from their fields to our network, and John’s team has increased the speed of produce items into our stores once they reach that network. As a result, freshness and in-stocks have been improving.“We’re also benefiting from the work in our stores to hire grocery experts and organize specialized teams, who now own the end-to-end process in those stores. Another great bright spot is our adult beverage business, which saw a mid-single-digit comp increase this quarter. We continue to focus on developing localized assortments and more compelling displays, and our guests are really responding.”