NEW YORK – Target Corp. reported a loss in its fourth quarter, dragged down by costs to end its money-losing foray in Canada. But the discount retailer recorded strong sales as shoppers bought more clothing and other items over the holiday period.
Target said Wednesday it lost a whopping $2.6 billion (U.S.) in the three months up to Jan. 31 as it wrote off its Canadian operations.
The results, which included the second consecutive increase in a key sales measure at U.S. stores in a year, come a little more than a month after the discounter announced it was giving up on Canada and focusing on revving up its U.S. business.
The decision to close the Canadian business is the first major move by CEO Brian Cornell, who took over the helm last August and who is charged with reclaiming the retailer’s image as a purveyor of cheap-chic fashions.
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The results also show how the Minneapolis-based company is successfully moving past a massive data breach disclosed a week before Christmas 2014 that compromised millions of credit and debit cards. That caused shoppers to flee for months and hurt sales and profits. That was one of the major reasons behind the abrupt departure of CEO Gregg Steinhafel, who resigned last May.
Target is also grappling with industrywide issues. Like other retailers catering to middle-income shoppers, Target’s customers have not benefited much from the country’s economic recovery because wages remain stagnant. Target also has seen a rapid shift among its shoppers to buy and research on their mobile devices.
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The discounter has been playing catch-up and revamping its apps and just lowered the threshold for free shipping.
“We’re seeing early momentum in our efforts to transform Target and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experiences while controlling costs,” said Cornell in a statement.
Even before Cornell took the helm, Target had begun to reassess its operations, sprucing up its baby departments and adding mannequins to its fashion areas. Cornell wants to double down on a handful of areas like children’s products and furniture. It is also re-imagining its grocery area and wants to focus on products unique to Target. Target is set to unveil more details of its strategy to investors on March 3.
The company said that it lost $2.6 billion, or $4.14 per share, in the three months ended Jan. 31. That compares with a profit of $520 million, or 82 cents per share a year earlier.
Excluding costs to exit Canada and other one-time items, Target’s adjusted earnings were $1.50 per share. Analysts polled by FactSet expected $1.46 per share. Target is now liquidating all 133 stores after entering Canada just two years ago.
Revenue rose 4.1 per cent to $21.7 billion. Revenue at stores opened at least a year rose 3.8 per cent. The measure is considered a key indicator of a retailer’s health.
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