Target chain warns of weaker outlook for year
In Canadian stores, focus will be on driving sales in health care, food, beauty and paper
Cautious consumers and costs associated with the rampup of its Canadian expansion will likely lead to weaker results for the remainder of the year, Target said Wednesday, as it reported a drop in second-quarter earnings.
The Minneapolis-based discount retailer, which entered the Canadian market in March and had 68 stores in the country by the end of the second quarter, is offering a muted full-year outlook.
“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,” Target chief executive Gregg Steinhafel said in a call with analysts.
In Canada, he said, the company is only five months into its launch, and is adjusting and refining operations as it prepares to open another 56 stores by the end of the year.
Target estimates its thirdquarter adjusted earnings per share will be between 80 and 90 cents US and net income will be between 55 cents and 65 cents.
The company also said its 2013 full-year adjusted earnings will be near the low end of its previous guidance of $4.70 to $4.90 per share.
Shares in the company closed at $65.50 in the New York Stock Exchange Wednesday, down $2.45, or more than three per cent.
Target Canada president Tony Fisher said initial traffic was good in Canada, with higher than expected sales in home and apparel, but the company must now focus on driving sales in health care, food, beauty and paper.
Target is also working to adjust inventory and in-store staffing to match the pace of sales in each of its locations.
“We continue to learn a lot,” Fisher said.
But, he added, “We don’t have to make transformational changes in our business model — it really is tweaks.”