Target's Same-Store Sales Up, But The Outlook Is Shaky

Target joined rival Walmart in lowering expectations for the year on Wednesday (Aug. 21) after the retailer reported a 13 percent drop in second-quarter profits.

Analysts expected earnings of 96 cents per share, which Target was able to beat at $1.19 per share, but revenue only reached $17.12 compared to the $17.28 that was predicted. Same-store sales were up 1.2 percent, much better than any of Target's largest competitors.

"For the balance of this year, our U.S. outlook envisions continued cautious spending by consumers in the face of ongoing household budget pressures," said Target CEO Gregg Steinhafel in a statement.

Both the job and housing markets have improved lately, but that still hasn't loosened Americans' grip on their wallets. Wage growth has been stagnant as well, and an increased Social Security payroll tax also means that families have less cash to spend.

As is the case for most retailers, the back-to-school season doesn't look likely to come to the rescue either. All of that has led Target to predict earnings per share for the full year to come in at the lower end of their previous guidance of $4.70 to $4.90. Those numbers had already been trimmed in May from the original outlook of $4.85 to $5.05.

But it's not all bad for the big red bullseye. Outside the US, one of the major contributing factors for this quarter's numbers has been the chain's expansion into Canada, growth that has been more challenging than expected but should pay off in the long run. Target has opened 68 stores in the great white north so far this year, and is aiming for 125 by the end of the year.

For more:

- See this Star Tribune story

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