Questions on Canada dominate Target's Q&A session with analysts after the Q2 results in the nation disappointed. Execs think seasonal clearances and a learning curve in store execution could cause gross margin rates to fluctuate, but long-term margin assumptions are still solid.
Target (TGT -3.9%) doesn't see a meaningful pickup in same-store sales in the U.S. during H2, a 1% forecast is offered vs. 2%-2.5% prior.
For 2014, the retailer expects to see significant improvement in profitability for Canada although a full-year loss is still likely. Inventory issues will have to be worked through.
The higher average basket size the retailer saw in Q2 is tied to more back-to-school shopping for higher-priced items and softer sales for incidental items near checkout lines.