Target Corporation (NYSE:TGT) reported a 13% decline in its second quarter profits on Wednesday. Retailers across the country continue to face challenges amid unsteady employment and increased taxes that hamper consumer demand. Net profit for the quarter ending August 3 plunged from $704 million or $1.06 a share to $611 million or 95 cents a share. Analysts polled by Bloomberg were expecting 95 cents a share.
Target’s Canada expansion ate into earnings
The Minneapolis-based company said today that its Q2 revenues jumped 4% to $17.1 billion, compared to the consensus estimate of $17.3 billion. Same store sales rose 1.2% during the quarter, while U.S. sales jumped 2.4% to $16.8 billion. Target Corporation (NYSE:TGT) CEO Gregg Steinhafel attributed weak results to 2% hike in Social Security taxes and unsteady employment that have forced low-income shoppers to cut spending. Increasing gas prices added to the burden as shoppers tend to make fewer trips to stores. Retail giants Wal-Mart Stores, Inc. (NYSE:WMT) and Macy’s, Inc. (NYSE:M) also reported weak earnings for the same reasons.
However, Target Corporation (NYSE:TGT)’s earnings were hit hard by massive expansion in Canada. The second largest U.S. discount retailer opened 44 stores in the country during the second quarter. Now the company has 68 stores in Canada. Target Corporation (NYSE:TGT) said that Canadian expansion lowered its second quarter earnings by 21 cents a share. Target Corporation (NYSE:TGT) has 1,788 stores in the United States alone.
Target’s full year guidance
The Minneapolis-based retailer expects third quarter adjusted earnings to come between 80 cents and 90 cents, compared to the Wall Street consensus of 88 cents per share. The company expects GAAP earnings of 55-65 cents a share. For the full year, Target Corporation (NYSE:TGT) expects adjusted earnings at the lower end of $4.70 to $4.90 range. GAAP earnings should be 95 cents less than adjusted earnings. Analysts polled by Thompson Reuters expect full year adjusted earnings of $4.74 per share.
Target Corporation (NYSE:TGT) expects U.S. economic environment to remain fragile, affecting consumer spending. Target Corporation (NYSE:TGT) shares were down 2.03% to $66.57 at 10:07 AM EDT.