Target's expansion into Canada continues to miss the mark, according to the company's latest quarterly earnings, forcing the U.S. retailer to cut its annual profit outlook.

Although sales at Target's 130 Canadian stores rose 63 per cent to $449 million in the second quarter compared to last year, when only 48 locations were open, another measure shows a more accurate and dismal picture. Sales at its Canadian stores open for a year or more fell more than 11 per cent — a sign that its disappointing launch in 2013 is still hampering foot traffic.

The sales drop led to an expanded operating loss from $169 million at this time last year to $204 million this year. 

The gross margin rate at Target Canada was about 18 per cent, which the company report said reflects the "continued impact of efforts to clear excess inventory."

"While results from the quarter didn’t meet our expectations, we are seeing some early signs of progress as we work to improve results in the U.S. and Canada," said John Mulligan, executive vice president and chief financial officer of Target. "In Canada, the team is making important changes to operations and the merchandise assortment with a focus on delivering improved results by this holiday season."

The retailer said Wednesday that despite the string of losses, it still plans to have 133 stores in Canada by
the end of this year and 150 stores by 2017.

Leading the expansion will be 15-year company veteran Mark Schindele, who replaced the fired CEO Tony Fisher in May.

Slow sales also in U.S.

There was a changing of the guard at Target's headquarters. For the first time, the retailer brought in an outsider as its CEO — Brian Cornell, who formerly worked as CEO of PepsiCo Americas Foods, president of Sam's Club of Wal-Mart International and CEO of Michaels Stores Inc.

The new leader hasn't yet restored Target's previous fortunes. In the U.S. last quarter, customers were still haunted by the massive data breached that affected millions last year. Sales there were down 1.3 per cent; still, that was a slight improvement from the previous quarter.

Overall, the Minneapolis-based company said its profit plummeted 61.7 per cent last quarter to $234 million US from $611 million a year earlier. 

Target shares closed higher by nearly two per cent at $60.33.