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Target shows signs of turnaround

Target shows signs of turnaround

TARGET:Target, which has fired both its chief executive and the head of its Canadian operation as it tries to regain its footing, reported a 0.3 percent drop in U.S. same-store sales. Photo: Reuters

(Reuters) – Target Corp reported a 16 percent drop in quarterly profit but showed signs of progress in its efforts to rebuild customer confidence in the wake of a massive theft of payment card data in the United States and a botched expansion into Canada.

Target, which has fired both its chief executive and the head of its Canadian operation as it tries to regain its footing, reported a 0.3 percent drop in U.S. same-store sales.

Analysts polled by Consensus Metrix had expected U.S. same-store sales to fall 1.1 percent.

“Traffic was dramatically better than our late fourth-quarter trends,” the company said.

Shares of the third-largest U.S. retailer were up 0.8 percent in premarket trading on Wednesday.

Interim Chief Executive John Mulligan said the company was “pleased with this momentum” but that more needed to be done.

Mulligan, the company’s chief financial officer, replaced Gregg Steinhafel, who was ousted earlier in May after a data breach during the holiday shopping season that resulted in the theft of at least 40 million payment card numbers and 70 million other pieces of customer data.

Steinhafel had also overseen Target’s bungled push into Canada, where the company lost almost $1 billion last year after opening 124 stores in an unprecedented expansion that caused supply chain and other operational problems.

Target fired the head of its Canada operations, Tony Fisher, on Tuesday and replaced him with company veteran Mark Schindele.

The Minneapolis-based company lowered its adjusted full-year profit forecast to $3.60-$3.90 per share, from its prior forecast of $3.85-$4.15 per share.

Analysts on average were expecting full-year earnings of $3.98 per share, according to Thomson Reuters.

Net income fell to $418 million, or 66 cents per share, in the first quarter ended May 3, from $498 million or 77 cents per share, a year earlier.

Pre-tax costs related to the data breach totaled $26 million in the quarter, primarily for legal and other third party services. Including insurance proceeds, expenses were $18 million. The company incurred $61 million in pre-tax costs related to the breach in the preceding quarter.

Excluding items, the company earned 70 cents per share.

Sales rose 2.1 percent to $17.05 billion. Canadian sales were $393 million, up from $86 million in the same period last year when the company had only 24 stores.

Analysts on average were expecting earnings of 71 cents per share, on revenue of $17 billion.

Target’s shares were trading at $57.07 before the bell, after closing at $56.61 on Tuesday. Up to Tuesday’s close, the stock had lost 10.5 percent since the start of the year.

(Reporting by Siddharth Cavale in Bangalore; Editing by Ted Kerr)

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