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Target: Movies, Electronics ‘Big Negative’ For Earnings

18 Aug, 2010 By: Chris Tribbey

Retailer Target reported earnings of $678 million for the quarter ended July 31, compared with $594 million during the same period in 2009. But Gregg Steinhafel, Target’s chairman, president and CEO, certainly didn’t credit home entertainment with the increase in profits.

“The big negative has really been around music, movies and electronic categories and video games,” he said in an Aug. 18 conference call with investors. “There [are] a lot more new releases and some things that we’re doing internally, that we believe will strengthen the trend there, but certainly not bring it back up to the company range.”

Earnings per share for the quarter were up 17% year-over-year to 92 cents as sales increased 3.8% to $15.1 billion, compared to $14.6 billion for the same quarter in 2009.

Kathee Tesija, EVP of merchandising, pointed to numerous trends that saw home entertainment categories suffer.

“Second-quarter sales trends in electronics, video games, music and movies softened noticeably at Target and elsewhere,” she said. “Some interpret this as a sign that consumers are pulling back on discretionary purchases, [but] we believe it’s also related to product’s lifecycle stages in these categories.”

She said the digital conversion, which took place last year, where consumers with analog TVs rushed for HDTV replacements, made a year-to-year comparison difficult.

“In addition, video game hardware platforms are as mature as they’ve ever been and a weaker new release schedule led to softer sales,” she said. “Looking ahead we believe both of these trends will begin to moderate in the fall as we move beyond the digital conversation and as newness in the video game category creates interest and spurs sales.”

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