During a conference call, Bob Ulrich, chairman and CEO, attributed the April weakness primarily to cold weather, which dampened apparel sales. But he also said the chain is prepared for a more difficult climate. Comp-store sales rose 4.3% for first quarter. Ulrich predicted mid-single-digit increases in full-year, comp-store sales.
Sales of movies and music, along with apparel were weaker than expected, said Gregg Steinhafel, president. Toddler and pharmacy and health and beauty aids, along with food, were among the strongest sales categories. In short, discretionary sales are lagging, while lower-margin consumables are taking up the slack.
The chain is expanding mom & baby and healthcare categories in coming months. Natural products and food are also being expanded, and Target is rolling out a line of "authentic Hispanic food" to 400 stores, Steinhafel said.
Greek-inspired fashion by Patrick Robinson is being added to the company's Go International apparel line. The consumer electronics category is also being expanded, primarily with large-screen TVs.
The company added 15 new stores during first quarter, taking its total to 1,500 in 47 states. Steinhafel said it will open 42 new units in second quarter. Of those, 10 will be SuperTargets and 32 will be discount stores.
Net income for the nation's second largest discount chain reached $651 million, up from $554 million for the same quarter of 2006. Total revenue was just north of $14 billion, up from nearly $12.9 billion in the prior-year quarter. Net credit card revenue for the year's opening quarter was $418 million, up 13% over $370 million in the first quarter of 2006. Management reported that credit card delinquencies are lower than expected.
Shares of TGT closed at $58.60 a share on the NYSE on May 23, following release of its first-quarter report. This compares with a 52-week low of $44.70 a share on July 18, 2006 and a 52-week high of $64.74 a share, which occurred on Feb. 20 this year.
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