FINANCE

Target Q4 profit plummets 46% as data breach takes toll

BY Dan Berthiaume

Minneapolis – Target Corp. saw dramatic year-over-year declines in its net earnings for the fourth quarter and fiscal year 2013, as the negative impact of its massive data breach and damages from its Canadian operations took effect. The chain warned that continuing costs related to the breach may affect its profits in the first quarter of fiscal 2014.

Target’s profit in the fourth quarter fell 46% to $520 million, slightly beating projections, from $961 million in the year-ago period. The breach resulted in $17 million of net expenses in the fourth quarter, Target said, with $61 million of total expenses partially offset by the recognition of a $44 million insurance receivable.

For the full fiscal year, earnings dropped 34% to $1.97 billion from about $3 billion versus last year.

Net earnings for the fourth quarter still managed to slightly beat analyst projections. Target warned

Total revenues did not fall as significantly. For the quarter, Target reported total revenues of $21.51 billion, down about 5% from $22.52 billion. Same-store sales fell 2.5%.

For the fiscal year, total revenues declined 1% to $72.6 billion from $73.3 billion.

Target said that its fourth quarter performance notably dropped after the Dec. 19, 2013 announcement of its data breach, ending what had been a strong holiday season. In addition, efforts to clear excess inventory from Canadian stores also affected results.

Target said on Wednesday it may have to incur costs tied to reissuing cards, lawsuits, governmental investigations and enforcement proceedings, legal expenses, investigative and consulting fees, and capital investments, among other things.

“For more than 50 years, Target has succeeded by focusing on our guests,” said Gregg Steinhafel, chairman, president and CEO of Target Corp. “During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales. However, results softened meaningfully following our December announcement of a data breach. As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks.”

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FINANCE

Lowe’s Q4 profit up 6%; 20 new stores planned

BY Dan Berthiaume

Mooresville, N.C. – Customer interest in core home improvement categories helped lift profits at Lowe’s Companies Inc. during the fourth quarter and fiscal year 2013.

Lowe’s fourth quarter earnings rose 6% to $306 million from $282 million in the year-ago period. Full year net earnings climbed 17% to $2.29 billion from $1.96 billion.

Quarterly net sales grew 5.5% to $11.66 billion from $11.04 billion. Annual net sales increased 6% to $53.41 billion from $50.52 billion. Same-store sales rose 3.9% during the quarter and 4.8% during the year.

Looking ahead, during fiscal 2014 Lowe’s plans to open approximately 15 home improvement stores and five neighborhood hardware stores. The retailer expects total sales to increase 5% and same-store sales to grow 4%.

"I am pleased with the progress we made throughout 2013, and would like to thank our employees,” said Robert A. Niblock, Lowe’s chairman, president and CEO. “They have shown unrelenting determination to provide outstanding service to customers every day in each market we serve, as we transform our company. During the quarter, we delivered solid performance in core home improvement categories, balancing softer sales of seasonal gifts and holiday decorations. When extreme winter weather arrived late in the quarter, our distribution network responded quickly and efficiently to move product where it was most needed.”

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FINANCE

Barnes & Noble swings to Q3 profit, plans new Nook

BY Dan Berthiaume

New York – Barnes & Noble swung from a net loss in the third quarter of fiscal 2013 to a net profit in the third quarter of fiscal 2014, even as revenues dropped.

Net earnings in the third quarter totaled $63.2 million, compared to a $3.7 million net loss in the same period a year earlier. Total revenues dropped 10.3% to $1.99 billion from $2.22 billion. A 50% revenue drop in the company’s Nook segment helped drive the overall decline, although all the company’s retail and college verticals also reported revenue drops.

Despite the decline in Nook revenue, Barnes & Noble said it is negotiating with several hardware partners and plans to release a new color Nook device in early fiscal 2015.

Michael P. Huseby, CEO of Barnes & Noble, said good titles, textbook rentals and a clearing out of Nook inventory helped produce a profit.

“During the third quarter, the company significantly improved its balance sheet and bottom line, while making real progress on our strategic priorities,” said Huseby. “Retail’s core same-store store sales benefited from a strong title line-up, strong execution and an effective advertising campaign. College entered into the spring back-to-school rush and saw continued growth in its higher-margin textbook rental business. Nook losses narrowed significantly as we achieved our objective of selling through much of our pre-holiday device inventory, while managing promotions to optimize sales.”

The company reaffirmed its previously issued full-year guidance, in which it expects retail same-store sales to decline in the high single digits, core retail same-bookstore sales to decline in the low- to mid-single digits and college same-store sales to decline in the low single digits.

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