BUSINESS
08/06/2014 12:29 EDT | Updated 08/06/2014 12:59 EDT

Target Lowers Outlook Amid ‘Continuing Train Wreck In Canada'

Target Corp. warned investors Tuesday that “softer than expected earnings” in Canada are among the reasons it’s lowering its outlook for the current quarter.

Target expects earnings for the quarter to come in at around 78 cents per share, compared to earlier guidance of 85 cents to $1 per share.

"While the environment in both the U.S. and Canada continues to be challenging, and results aren't yet where they need to be, we are making progress in our efforts to drive U.S. traffic and sales, improve our Canadian operations and advance Target's digital transformation," interim CEO John Mulligan said, as quoted at the Wall Street Journal.

The company also said costs associated with the massive breach of customers’ credit and debit card information over the holiday season continued to impact its earnings.

But retail analyst Jan Kniffen told CNBC the data breach is a “sideshow” and what’s really hurting the company is “bad sales, bad gross margins due to promotional markdowns and the continuing train wreck in the Canadian segment."

Cowen and Co. analyst Faye Landes said in a client note the lowered guidance would spur further debate about whether the retailer should exit Canada.

She said investors expect to hear more on this subject from Target’s new CEO, ex-PepsiCo exec Brian Cornell, on Aug. 20, when the company next reports earnings.

As of the last earnings report, Target had lost about $1.5 billion on its Canadian operations. The chain just opened its 130th store in Canada.

Retail analyst Brian Sozzi, who has been hammering Target about its ongoing problems stocking shelves in Canadian stores, said he expects Target to lower its guidance once again when it reports earnings.

Target Canada's Empty Shelves