Target’s Q1 Results: Give me back my Tar-zhay!
By Sandy Skrovan, U.S. Research Director, Planet Retail
On Target’s first quarter results, Sandy Skrovan, U.S. Research Director at Planet Retail, comments:
"Don’t expect a lot from Target this quarter. The data breach and subsequent fallout – including leadership turnover and ongoing shopper trust issues – weigh like an albatross around the retailer’s neck. Besides dealing with internal issues, some broader retail metrics don’t bode well for Target either, suggesting another disappointing quarter is on the cards."
"Target also has its work cut out to refocus attention on some basic retail fundamentals – e.g. inventory management, merchandise excitement, and good old friendly customer service. Out-of-stocks are becoming increasingly problematic. Some aisles beyond grocery even appear in bad shape.
"It’s taken its eye off the ball – namely,i.e. core US operations – by taking on too many new ventures all at once: Canada, urban CityTarget, online. Two years ago, Planet Retail surmised that while this combination of future growth possibilities could be quite powerful, we were concerned Target was biting off more than it could chew. I wish Target had proved us wrong, but sadly it’s not the case."
Sandy Skrovan can be reached at [email protected]
Michaels solid in first quarter
While many retailers were still reeling from a prolonged winter that hurt their first quarter results, Michaels saw solid results in its first quarter, posting increases in both net and comparable-store sales.
Net sales increased 5.9% to $1.05 billion from $993 million during last year’s first quarter. Comparable store sales increased 3.8% driven by a 2.4% increase in the company’s average ticket, a 1.3% increase in transactions and a 10 basis point positive impact from deferred custom framing revenue. The Canadian foreign exchange rate negatively impacted comparable-store sales by 80 basis points.
Gross profit for the quarter increased 4.9% to $429 million from $409 million during last year’s first quarter. Gross profit as a percent of net sales decreased approximately 40 basis points to 40.8%. This decrease was driven by increased freight and distribution costs, higher remodel costs and lower merchandise margin.
Net income for the quarter increased 21.7% to $56 million and increased approximately 70 basis points as a percent of net sales to 5.3%.
During the quarter, the company opened eight and relocated five Michaels stores and closed three Aaron Brothers stores. The company operated 27 net new Michaels and Aaron Brothers stores in the past 12 months. The company now operates a total of 1,262 stores including 1,144 Michaels stores and 118 Aaron Brothers stores.
eBay database breached by cyberattackers
eBay will be asking its users to change their passwords thanks to a cyberattack that compromised a database containing encrypted passwords and other non-financial data.
After conducting extensive tests on its networks, the company said it has no evidence of the breach resulting in unauthorized activity for its users, and no evidence of any unauthorized access to financial or credit card information, which is stored separately in encrypted formats. However, the company said that changing passwords is “a best practice” and will help enhance security for its users.
“Information security and customer data protection are of paramount importance to us,” the company said in a statement, adding that it regrets any inconvenience or concern that the password reset may cause its customers. “We know our customers trust us with their information, and we take seriously our commitment to maintaining a safe, secure and trusted global marketplace.”
Cyberattackers gained access to “a small number of employee log-in credentials,” allowing unauthorized access to eBay’s corporate network, the company said. Working with law enforcement and leading security experts, the company is investigating the matter and looking into protecting its customers.
The database, which was compromised between late February and early March, included eBay customers’ names, encrypted passwords, email addresses, physical addresses, phone numbers and dates of birth. eBay reiterated that the database did not contain financial information or other confidential personal information.
The company said that the compromised employee log-in credentials were first detected about two weeks ago. Extensive forensics subsequently identified the compromised eBay database, resulting in the company’s announcement today.
eBay said it has seen no indication of increased fraudulent account activity on its site and that it has no evidence of unauthorized access or compromises to personal or financial information for PayPal users. PayPal data is stored separately on a secure network, and all its related financial information is encrypted.
Users will be notified via email, site communications and other marketing channels beginning later today to change their password. In addition to asking users to change their passwords, the company said it also is encouraging any users who utilize the same password on other sites to change those passwords, too, cautioning that the same password should never be used across multiple sites or accounts.