UPDATE 3-Target cuts full-year forecast after weak first quarter
* Adjusted EPS 82 cents vs Street view 85 cents
* Revenue $16.71 billion vs view $16.78 billion
* Shares down more than 3 percent
By Jessica Wohl
May 22 (Reuters) - Target Corp cut its full-year profit forecast on Wednesday while turning in a weak first quarter with disappointing sales, as a chilly start to spring kept shoppers from buying seasonal items like clothing.
Target warned in April its first-quarter results would be weaker than anticipated, and its performance was even worse than revised Wall Street expectations due to the cool weather and the impact of higher payroll taxes on spending.
Shares of Target fell 3.6 percent to $68.70.
First-quarter sales at stores open at least a year fell 0.6 percent, while analysts targeted a 0.03 percent decline, according to Thomson Reuters I/B/E/S. Back in April, Target forecast same-store sales would be about flat versus its previous outlook of flat to up 2 percent.
"This is Target's weakest quarterly same-store sales performance since the Great Recession year of 2009," said Sandy Skrovan, U.S. research director at Planet Retail.
The last time Target's quarterly same-store sales fell was in the third quarter of 2009, when it posted a decline of 1.6 percent.
This year, shoppers held off buying spring merchandise such as clothing, fans and garden supplies as a chilly start to the season left them little reason to splurge.
"Across the board things were disappointing for a lot of retailers," Skrovan said.
The U.S. economy has been somewhat resilient. Core U.S. retail sales, which strip out automobiles, gasoline and building materials, rose 0.5 percent in April, after an upwardly revised 0.1 percent gain in March.
The end of a 2 percent payroll tax cut took effect on Jan. 1 and the smaller paychecks have made some consumers less willing to spend. Still, declining gasoline prices have offset some of the drag on household income.
"While weather was a clear negative in (the first quarter), the revised view suggests that underlying pressure on moderate income consumer spending remains," said Bernstein Research analyst Colin McGranahan.
The pressure is not limited to Target. Last week, Wal-Mart Stores Inc posted an unexpected 1.4 percent decline in same-store sales at its Walmart U.S. unit, while Kohl's Corp posted a 1.9 percent decline in same-store sales. And on Wednesday, Lowe's Cos Inc reported weaker-than-expected quarterly profit, hurt by the chilly weather as well as competition from larger rival Home Depot Inc.
Target earned $498 million, or 77 cents per share, in the first quarter ended on May 4, compared with a profit of $697 million, or $1.04 per share, a year earlier.
Including the effects from opening Canadian stores, but excluding losses related to the early retirement of debt and gains from the sale of its credit card business, Target earned 82 cents per share. On that basis, analysts looked for 85 cents per share, according to Thomson Reuters I/B/E/S.
Total sales rose 1 percent to $16.71 billion, while analysts expected $16.78 billion in revenue.
The number of transactions in stores open at least a year fell 1.9 percent. Shoppers spent more overall and bought more items, but the selling price per unit was down, suggesting lower-priced items like groceries were selling well, Skrovan said.
Also, more shoppers took advantage of the 5 percent discount offered to Target's REDcard holders. It said 17.1 percent of sales in its stores were paid for with REDcard credit and debit cards, versus 11.6 percent a year ago.
Target said its first 24 Canadian stores, opened in March, generated $86 million in sales in the quarter. The company, which plans to have 124 stores in Canada by the end of the year, said costs related to the Canadian launch reduced earnings by 24 cents per share in the first quarter.
Target now expects adjusted earnings of $4.70 to $4.90 per share this year, down from its April forecast of $4.85 to $5.05.