Target tops earnings view, but tempers profit outlook
MINNEAPOLIS — First-quarter sales at Target increased 2.8% to $15.6 billion, and same-store sales increased 2%, the company reported.
The modest sales growth translated into earnings per share that advance 9.8% to 99 cents, 4 cents better than analysts’ consensus estimate of 95 cents, and net income that increased 2.7% to $689 million. Share repurchase activity contributed to the earnings-per-share growth as Target spent $819 million during the first quarter to buy back 15.4 million shares at an average price of $53.32.
“Our first-quarter financial performance was the result of stronger-than-expected profitability in our credit card segment, which offset the impact of weaker-than-expected sales in our retail segment,” Target’s chairman, president and CEO Gregg Steinhafel said.
Operating profits for the retail segment declined 4.2% to slightly more than $1 billion during the quarter as the company’s PFresh remodeling efforts and 5% rewards program pressured expenses and caused gross margins to contract to 30.4%, compared with 31.3% in the year-ago period.
Target expects to maintain its breakneck pace of store remodeling activity during the remainder of the year, with 300 additional units slated for remodel before October, adding to the 550 units that have already been converted to the PFresh concept.
In contrast to the performance of the retail business, the credit card segment produced unusually strong operating profits, which grew by 75% to $194 million as bad debt expense was virtually nonexistent at $12 million, compared with $197 million. Following the launch of the 5% rewards program, Target’s RED card products now account for 7.6% of the company’s sales.
Looking forward, Target CFO Doug Scovanner said analysts’ current consensus estimate of $1 for the second quarter seems potentially achievable but above the midpoint of a range of likely outcomes, as is the case with analysts’ full-year estimate of $4.23.
As for comps, Scovanner said, “We remain quite likely to achieve 4% to 5 % same-store sales performance in the fall, and I believe we are quite likely to experience better same-store sales growth in the second quarter than we did in the first quarter.”
Strong food sales help drive up Q1 comps for BJ’s Wholesale Club
WESTBOROUGH, Mass. — BJ’s Wholesale Club reported net income of $33.7 million, or 62 cents per diluted share, for the first quarter ended April 30.
Results for first quarter 2011 exceeded the company’s guidance for net income in the range of $29.5 million to $31.5 million, or 54 cents to 58 cents per diluted share.
BJ’s president and CEO, Laura Sen, said, “BJ’s is off to a great start in 2011. Our stronger-than-expected performance for the first three months of 2011 reflects net sales above plan, continued margin expansion and excellent cost control. I am very proud of our team members in the field, distribution centers and home office for delivering another great quarter.”
Net sales for first quarter 2011 increased by 10% to $2.77 billion, and comparable-club sales increased by 6.3%, including a contribution from gasoline sales of 3.9%. Merchandise comparable-club sales excluding gasoline increased by 2.4%.
Departments with the strongest comparable-club sales increases included bakery, dairy, deli, frozen, health and wellness, meat, milk, prepared foods, produce and small appliances. Weaker departments vs. last year included apparel, books, cigarettes, diapers, prerecorded video and televisions.
For the year ending Jan. 28, 2012, the company now expects to report net income in the range of $147 million to $157 million and earnings per diluted share in the range of $2.68 to $2.88. For the second quarter ending July 30, the company expects to report net income in the range of $40.5 million to $42.5 million and earnings per diluted share in the range of 74 cents to 78 cents.
Off! introduces new insect repellent products
RACINE, Wis. — An insect repellent brand has revamped its product line.
Off! introduced its latest innovation, Off! Deep Woods Dry, which offers comfortable protection in heavily wooded areas. The brand also introduced Off! Botanicals towelettes and lotions, which are made with a plant-based repellent that protects against mosquitoes, black flies, gnats and no-see-ums. What’s more, the Off! brand has redesigned its Off! Clip-On mosquito repellent, which now is 25% smaller.
Off! Deep Woods Dry retails for $5.99 for a 4-oz. can, Off! Botanicals towelettes and lotions retail for $4.99 each and the Off! Clip-On mosquito repellent retails for $8.99 for the starter kit. Off! products are available nationwide, including at CVS/pharmacy, Target and Walmart.