Target's profit stung by losses in CanadaMay 21, 2014: 8:33 AM ET
Retailer's first quarterly results after departure of CEO following massive data breach.
FORTUNE -- Target Corp. (TGT) reported a 16% drop in fiscal first-quarter profit as the retailer's Canada division remained unprofitable and same-store sales in the U.S. declined slightly as a result of fewer transactions.
The quarterly results are the first since Target's chief executive, Gregg Steinhafel, resigned earlier this month in the wake of a massive data breach that kept shoppers away during the crucial holiday season. In another management shuffle, Target fired the head of its Canadian operations Tuesday, following a troubled start to the company's first move outside the United States.
On Wednesday, Target also trimmed its expectations for the fiscal year, now seeing an adjusted profit between $3.60 to $3.90 a share, down from the prior view of $3.85 to $4.15 in per-share earnings.
"The expectations were so low heading into this quarter," Joe Feldman, managing director at Telsey Advisory Group, told CNBC shortly after the results were released.
For the latest period, same-store sales in the U.S. slid 0.3%, near the high end of Target's expected range. The retailer's performance at home has been mixed in recent quarters, including a decline in the fourth quarter last year due to the data breach. Target last posted growth of over 3% for that key retail metric nearly two years ago.
In Canada, where Target now operates 127 stores, sales totaled $393 million in the latest quarter while the loss before interest, taxes, depreciation, and amortization totaled $144 million. The loss in that region was less severe than Target had anticipated, though sales growth failed to meet expectations.
Observers say the retail chain did a poor job of replicating its American shopping experience in Canada, mostly pointing to higher prices there. Target has said it expects sales in Canada to double last year's total of over $1.3 billion, though the division remains unprofitable.
Net earnings for the quarter ended May 3 totaled $418 million, or 66 cents a share, down from $498 million, or 77 cents a share, a year ago. Adjusted profit fell to 70 cents from 82 cents a share as costs grew. Sales rose 2.1% to $17.05 billion.
Target in February projected an adjusted profit between 60 cents to 75 cents a share, while analysts surveyed by Bloomberg expected Target to report sales of $17.02 billion.