Target cuts outlook as it sees fewer customers in stores

NEW YORK (AP) — Target Corp. cut its profit forecast and a key sales outlook Wednesday as it saw fewer customers in its stores and acknowledged it didn’t push the second part of its “Expect More, Pay Less” slogan.

The Minneapolis-based discounter’s second-quarter net income fell nearly 10 percent, though that was better than what most had expected. Sales at stores open at least a year fell 1.1 percent, reversing seven straight quarters of gains.

Target’s shares fell nearly 7 percent in morning trading.

Customer traffic fell for the first time in a year and a half. The company attributed that to it falling short on the “Pay Less” position, turning off shoppers looking for essentials like detergent or basic T-shirts. Target also cited issues in the quarter that were both company-specific and industrywide. They ranged from a lack of new products in its electronics area to disappointing business in perishables like fruits and vegetables and disruptions caused by its sale of its pharmacy business to CVS. The deal was completed in December of 2015.

Target also saw a wide variability in sales by markets, noting weakness on the East Coast but pockets of strength in parts of California.

“Our No. 1 focus is driving traffic back to our stores and accelerating business to our site,” Chief Executive Brian Cornell told analysts on a conference call.

To boost sales and traffic, Target plans to increase marketing for its essentials and work with key vendors like Apple to push more innovation and to also improve presentations. In the pharmacy areas, it’s working with the pharmacists to have them play a key role in the departments. It’s still trying to reinvent its food area.

Target is also developing specific marketing plans to address key regional areas that have seen slower sales. And it’s expanding its online services — doubling the number of stores that will be used to ship products directly to online shoppers’ homes, which will result in speedier deliveries. Online sales rose 16 percent in the second quarter, lower than the 23 percent gain in the first quarter.

“Our progress in apparel and home has been really significant,” said Cornell. “And we’ve got to make sure we never lose track of the other side of our brand promise and that’s the “Pay Less” side. And that’s all about those core household essentials that we have to make sure are presented effectively.”