It seems these days that even a decent earnings release can't lift investors' spirits, especially in the beleaguered retail sector.

Of course, it doesn't help if a company pairs the release of better-than-expected earnings with gloom and doom future guidance.

That is the case with Target (TGT - Get Report)  Wednesday, as the company beat analysts' second-quarter estimates. However, management also issued a rather dire warning about the rest of the year, lowering guidance on what investors and analysts should expect.

Of course, Target wasn't expecting much to begin with. For the most part, the brick-and-mortar retail sector is in bad shape.

But Target's dour outlook has sent the stock down more than 6% Wednesday while investors should have been celebrating the quarter. 

Second-quarter earnings came in at $1.23 a share on $16.19 billion in revenue, beating the consensus estimate of $1.12 per share on $16.18 billion in revenue. Not too shabby.

A year earlier, Target reported earnings of $1.22 a share on $17.43 billion in revenue.

Part of the pressure on Target's earnings stems from the company's sale of its pharmacy business to CVS Health in December.

Comparable sales registered a decline of 1.1%, in line with Wall Street's expectations of a 1% decline. However, this marked the first time that comparable sales have been negative since the first quarter of 2014.

More troublesome is the company's recorded growth for digital sales. This metric came in at 16%, which is cause for concern when compared with the 23% growth recorded in the first quarter this year and the 30% gain a year earlier.

Ecommerce has drastically changed the way Americans shop. As Internet titans such as Amazon grow by leaps and bounds, even outpacing traditional stores on sales of apparel, other retailers are being forced to follow suit or be left behind.

Target's main competitor, Walmart, is even attempting to play Amazon's game, creating a quick-shipping membership-based service to rival Prime and employing drones in fulfillment warehouses to streamline inventory keeping. The mega-retailer is spending billions on catching up in the ecommerce game.

But Target isn't. And its slowing digital growth is particularly worrisome.

At least chairman and Chief Executive Brian Cornell recognized that the landscape for retail is changing and becoming more challenging, mentioning a "difficult retail environment" in a statement Wednesday.

Worries about the "difficult" environment led the company to issue weak guidance for the third quarter and the entire fiscal year.

Whereas prior guidance called for 2016 earnings of $5.20 to $5.40 a share, Target now expects to earn $4.80 to $5.20 a share.

And Target now expects comparable sales to be flat to down 2% for the third and fourth quarters.

Even if Target were to turn around and make drastic improvements and upgrades to its ecommerce business, it would be too little, too late. Whereas this company was once a chic market leader and trendsetter, Target is now a stale and outdated retailer. 

Investors should steer clear.


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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.