You Can't Safely Step Into Target Stock Until This Happens
Three months ago, Target (NYSE: TGT) warned shareholders that the second quarter could be a tough one. During the company's first-quarter earnings call, chief financial officer Michael Fiddelke said, "We expect a [second-quarter] operating margin rate in a wide range, centered around our first-quarter rate of 5.3%, well below where we would expect to operate under normal conditions."
The key culprit? Excess inventory that needed to be heavily marked down to get out of its stores.
And sure enough, the company largely delivered as expected. Gross margins on the goods its sold slipped from the first quarter's 24.3% to 20.4% in the second quarter, well down from the year-ago figure of 30%. Subsequently, the operating bottom line tumbled from $3.65 per share a year earlier to a scant $0.39 per share, well short of analysts' estimates of $0.79 despite same-store sales growth of 2.6%.
Source Fool.com
