Target reports declining revenue in first quarter

Target's first-quarter profit easily beat Wall Street expectations, but slowing sales at the Minneapolis retailer and across much of the retail sector is creating a lot of unease.

Target's weak store sales and its expectations for this quarter, released Wednesday, pushed shares down 8 percent before the opening bell. Shares of almost every retailer followed suit in what is shaping up to be a miserable year.

Target earned $632 million, or $1.05 per share, for the three months ended April 30. That compares with $635 million, or 98 cents per share, a year ago.

Stripping out one-time items, earnings were $1.29 per share, which was much better than the $1.19 per share projected on Wall Street, according to a FactSet survey.

But revenue slipped to $16.2 billion from $17.12 billion, which was shy of expectations.

Sales at stores opened at least a year rose 1.2 percent, but that's below the increase of 1.6 percent that was expected. Industry analysts watch this figure closely when determining a retailer's health because removes the volatility of stores recently opened or closed.

Before Target, major department stores like Macy's Inc., J.C. Penney Co. and Kohl's Corp. all posted weak first-quarter sales with pressure rising from off-priced stores like T.J. Maxx and also Amazon.com.

But Americans are also spending a lot more money on vacations and dining out, rather than on clothing.

Target has been working on reinvigorating its business under CEO Brian Cornell, who took the helm in August 2014. He wants to regain the retailer's cheap chic status and make Target more nimble after a series of headline-grabbing setbacks, including a major debit and credit card breach that hurt sales and profits for months.

During the recession, the company lost its mojo as a trendsetter when it expanded aggressively with grocery aisles.

Under Cornell, the company closed its Canadian operations last year and has been reshaping its management team. On Tuesday, Target named Mark Tritton, an executive at Nordstrom, to be its chief merchandising officer. That fills a role that had been vacant for almost a year when long-time executive Kathryn Tesija stepped aside.

Target is focusing on key merchandise categories like fashion, home furnishings and wellness products. The company has spruced up its presentation and added mannequins to display its clothing. It has created vignettes to feature its home products. Target is also overhauling the foods it does sell to offer healthier, fresher options. At the same time, it's shifting more of its spending from stores to online investments and its supply network.

Target said Wednesday that it still expects its full-year adjusted profit to be within its previous guidance range of $5.20 to $5.40 per share. Analysts surveyed by FactSet are looking for $5.27 per share.

For the second quarter, the retailer said its view has been tempered by the recent slowdown in consumer trends. The chain is projecting an adjusted profit of $1 to $1.20 per share for the period, with same-store sales flat to down 2 percent. Wall Street anticipates a profit of $1.36 per share, with same-store sales up 1.8 percent.

Shares fell $5.93 to $67.66 in premarket trading. Shares of J.C. Penney, Kohl's, Macy's and Nordstrom fell as well.

Shares of Wal-Mart, which reports earnings on Thursday, fell almost 4 percent.