Digital sales grew 30%, slowing from the nearly 38% growth Target posted in the first quarter of the year.
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After starting the day 4 percent up in early trading, Target shares fell into negative territory. The company bought back shares worth $675 million and paid dividends of $331 million in the reported quarter.
For the third quarter fiscal 2015, the company expects adjusted earnings per share in the range of 79 – 89 cents.
For Q2, Target said adjusted earnings from continuing operations grew 20.6% to $1.22 a share, and revenue rose almost 3% to $17.42 billion.
Target’s results extend its recent streak of outperforming big-box rival Wal-Mart Stores Inc. The company raised its annual profit outlook and said its second-quarter net income more than tripled.
The Star Tribune reports part of the problem is being caused by its efforts to fulfill online orders from its stores and warehouses. On Monday, Target said it was promoting its Chief Financial Officer John Mulligan to the newly created role of chief operating officer.
Department store chains Macy’s and Kohl’s both reported last week declines in second-quarter profit and weak sales as shoppers have been pulling back buying traditional items like clothing and gravitating more toward services or going out to eat.
“Target tends to use outside wholesalers and outsources a large amount of distribution, typically on fast-moving consumables”, said Burt Flickinger, managing director at retail consulting firm Strategic Resource Group.
“We’re very pleased with our second quarter financial results, as traffic growth, strong sales in our signature categories and continued expense discipline drove better-than-expected profitability”, pointed out Cornell in a statement.
The company now believes that it will earn $4.60 to $4.75 per share for the full year. That compares with $234 million, or 37 cents per share, a year earlier.
“Given the breadth and complexity of the business, it will always be a challenge to be in stock on every item in every store… but our guests need us to be consistent in delivering everyday essentials”, Mulligan said.
“In our view much of this is down to a strategy that has seen Target shift away from chasing consumers only interested in low prices, to ones that are more concerned with good value”.
The average estimate among 34 Estimize users was for earnings of $1.12 per share and revenue of $17.42 billion. The hackers accessed the credit card data of at least 40 million Target customers during a three-week period.
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Target has invested in upgraded store presentation, particularly for apparel, where the brand is in the process of rolling out mannequins. Still, the increased spending helped Wal-Mart log a 1.5% increase in U.S. same-store sales.
