(Adds investor quote, Canadian details, byline, updates stock
By Phil Wahba
Nov 21 Discount chain Target Corp on
Thursday blamed what it called "constrained" U.S. consumer
spending for a tepid rise in quarterly comparable sales, and
lowered its full-year profit forecast as a Canadian expansion
proved costlier than expected.
Shares fell 3.7 percent to $64 in premarket trading.
Target competes most directly with Wal-Mart Stores Inc
and other discount retailers, which have all ramped up
their promotions to win over reluctant U.S. shoppers.
Last week, Walmart U.S. reported a small decline in
comparable sales for its third quarter, and forecast no growth
for the current quarter. It is starting holiday season sales
earlier than ever to stave off rivals.
"It is challenging for retailers because things are OK out
there, they're not good," said Shawn Kravetz, president of
investment firm Esplanade Capital, which owns Target shares. "So
retailers are getting more aggressive. Everything's a bit
An Ipsos poll for Reuters last week found more Americans
were planning to spend less this holiday season than last year,
and demanding big bargains.
Target's third-quarter comparable sales were up 0.9 percent,
while analysts estimated a rise of 1.3 percent, according to
Thomson Reuters I/B/E/S. Overall revenue rose 4 percent to
$17.26 billion, below the Wall Street target of $17.36 billion.
Target, which offers a mix of basic goods and trendy apparel
and accessories, pared its full-year outlook in part because its
Canadian expansion this year has take longer to pay off than
expected. Target opened its first Canadian stores in March after
announcing the plan in early 2011.
The discounter expects its Canadian expenses to reduce this
year's earnings by between 95 cents and $1.05 per share, up from
82 cents previously.
Canadian sales totaled $333 million in the quarter, but
gross profit margin was 14.8 percent of sales as it cleared
unsold inventory. By comparison, the U.S. gross margin was 30
Target Chief Executive Gregg Steinhafel said the company was
more focused on improving its Canadian operations.
The retailer said it was looking to earn an adjusted profit
per share of $4.59 to $4.69, compared with an earlier range of
$4.70 to $4.90.
For the quarter ended Nov. 2, earnings fell to $341 million,
or 54 cents per share, from $637 million, or 96 cents per share,
a year earlier.
"Consumer spending remains constrained" in the United
States, Steinhafel said in a statement.
Other retailers reported disappointing sales on Thursday.
Dollar Tree Inc said comparable sales rose a
less-than-expected 3.1 percent, and Sears Holdings Corp
reported that U.S. comparable stores fell 4 percent.
Abercrombie & Fitch Co, struggling with the
defection of many teenage shoppers, forecast a double-digit
percentage decline in comparable sales in the holiday quarter.
(Reporting by Phil Wahba in New York; Editing by Gerald E.
McCormick and Jeffrey Benkoe)