It's been tough to own Target. The stock has been all over the place. The shares have traded as high as $82 and as low as $64. In mid-May, the company reported a solid first quarter, but gave lower guidance for the second quarter. While the company met second-quarter guidance, management gave lower guidance again for the third quarter.
In mid-August, Target reported an uninspiring second quarter, with earnings of $1.23 per share, 10 cents better than expected. Revenue fell 7.2% to $16.17 billion, in line with estimates. But the real disappointment came from same-store sales.
Management said same-store sales declined 1.1%. While in line with previous guidance, that was disappointing nonetheless. The number of transactions fell 2.2%, which means Target is having trouble getting foot traffic in the door.
The company slashed third-quarter guidance. Management expects third-quarter earnings between 75 cents and 95 cents per share, vs. the consensus of 96 cents. The company also cut full-year estimates to a range between $4.80 and $5.20 from its original estimate of $5.20 to $5.40. Analysts were estimating $5.13.
Because of the tough retail environment, the company cut same-store sales guidance to a range of negative 2% to 0%. Analysts were at 1.2% for the third quarter and 1.5% for the fourth.
Target reports its third quarter on Wednesday. I don't think investors have any confidence in the plans to turn around same-store sales. Last quarter, Target saw "meaningful" pressure on electronics. The company said one-third of the comp decline was attributable to Apple (AAPL) sales. (Apple is an Action Alerts PLUS holding.) Target also missed on grocery. Digital sales grew 16%, but in the first quarter, digital grew 23%.