MINNEAPOLIS — Target Corp. here on Wednesday lowered its sales and earnings forecast for the year, citing weak spending from cautious consumers.
The company also said sales have been weaker than expected in Canada, where Target made its debut earlier this year and now operates 68 stores.
“As we monitor the economy and consumer sentiment, we continue to see a mix of signals in which emerging optimism is balanced with continuing challenges,” said Gregg Steinhafel, chairman, president and chief executive officer, in a conference call discussing second-quarter results. “This year's payroll tax increase continues to affect spending, particularly among lower and moderate income households, and household formation in younger demographic groups remains stubbornly negative.
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“Recent job growth numbers have been encouraging, but labor force participation and income growth remain weak.”
Second quarter U.S. comparable-store sales increased 1.2%, vs. analyst expectations of a little over 2%, and the company lowered its expectations for the year.
“For the full year, we’ve become incrementally more cautious in our U.S. sales outlook given our own recent results and those of our competitors,” said John J. Mulligan, chief financial officer. “We now expect full year comparable sales increases of about 1%, down from our prior outlook for an increase of 2% to 2.5%.”
The results follow a similar report last week from Wal-Mart Stores, which also reported comparable-store sales below expectations.
Read more: Wal-Mart Dims Outlook After Soft Q2
In Canada, Steinhafel said the company had promoted its apparel and home goods offerings heavily leading to the rollout of its stores there, but will turn its attention now toward more high-frequency categories like health care, food and other basic commodities.
“Sales in these categories have grown much more slowly than we expected, causing overall sales and profit momentum to build more slowly as well,” he said.
Overall, net income for the quarter, which ended Aug. 3, was $611 million, down 13.2%, on a 2% increase in revenues, to $17.1 billion, compared with the year-ago second quarter.
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