Target blames Canada and cautious shoppers as it warns on year

By Jessica Wohl

Wed Aug 21, 2013 1:29pm EDT

n">(Reuters) - Target Corp (TGT.N) warned of weak annual sales and profits on Wednesday as U.S. shoppers remain cautious and its new Canadian stores are not doing as well as anticipated.

Shares of Target fell as much as 4.1 percent to $65.14, their lowest level since March, and were down 3 percent in later trading.

The chain, which competes against Wal-Mart Stores Inc (WMT.N) and other discount retailers with a mix of basic goods, apparel and accessories, posted a second-quarter profit just ahead of expectations while sales missed estimates.

Target said this year's profit should come in at the low end of already reduced expectations and that sales at stores open at least a year should grow just 1 percent rather than 2 to 2.5 percent, as U.S. shoppers remain cautious in the face of ongoing household budget pressures such as higher taxes and gasoline prices.

At the same time, the Canadian business is costing more than Target anticipated and will weigh on full-year profit.

Target opened its first Canadian stores in March after announcing its plans in early 2011. That gave Target time to remodel the stores it bought from Zellers, hire and train thousands of employees and set up its supply chain, but it also gave competitors time to step up their efforts.

"The competitors have really done a good job in defending their space," said Stewart Samuel, program director at IGD Canada, pointing in particular to Wal-Mart, Loblaw Cos Ltd (L.TO) and Shoppers Drug Mart Corp (SC.TO).

Target said it needs to do a better job of advertising low prices on basic goods such as healthcare and food items that bring shoppers in often.

Expenses from Target's Canadian operation cut 21 cents per share from quarterly profit, 5 cents more than it forecast. It expects its Canadian expenses to reduce this year's earnings by 82 cents per share, up from a previous forecast of 45 cents.

"It's definitely gotten off to a slower start than the company expected," said Shawn Kravetz, president of Esplanade Capital LLC, which owns Target shares.

Target has 68 Canadian stores and plans for 124 by the end of the year.

WALMART U.S. DROPS LAYAWAY FEE

In the United States, which remains Target's main market by far, shoppers are visiting less often. Consumer spending on homes and cars is crowding out other spending, and income growth remains weak, said Chief Executive Gregg Steinhafel.

A handful of retailers such as TJX Cos Inc (TJX.N) along with home improvement chains have shown strength but "the rest of retail is sluggish at best," said Kravetz at Esplanade Capital. "Wal-Mart and others made it crystal clear that it is a little bit tougher out there, so that shouldn't be a surprise to anyone."

Separately, Walmart U.S. said its holiday layaway program that starts in mid-September will now be free as it gets rid of an opening fee. Layaway allows a customer to keep a product on hold at the store and pay for it over time and is also being used by chains such as Sears Holding Corp's (SHLD.O) Kmart and by Toys R Us TOYS.UL, but not by Target.

Cowen & Co analyst Faye Landes called Walmart's layaway announcement "a shot across the bow to its competitors, and one that clearly signals intensifying competition ahead of the all-important 2013 holiday shopping season."

Data from an Ipsos poll conducted for Reuters from August 15 to August 19 showed 13 percent of respondents said they were buying more items on layaway this year than last year.

"Our customers are feeling the pinch and they are watching every penny today," Walmart U.S. Chief Merchandising and Marketing Officer Duncan Mac Naughton said on Wednesday.

SALES MISS FORECASTS

In May, Target, noting that shoppers were sticking to shopping lists, trimmed its fiscal-year adjusted earnings per share forecast to a range of $4.70 to $4.90 from $4.85 to $5.05. It now expects a profit near the low end of that range.

Target earned $611 million, or 95 cents per share, in the fiscal second quarter ended August 3, down from $704 million, or $1.06 per share, a year earlier.

Including the effects from opening Canadian stores but excluding other items, Target earned 97 cents per share, one penny more than analysts expected, according to Thomson Reuters I/B/E/S. Second-quarter sales rose 4 percent to $17.12 billion, missing the analysts' target of $17.26 billion.

Target's same-store sales rose 1.2 percent, below analysts' estimate of a 2.1 percent increase and its own forecast of a 2 percent to 3 percent gain. Last week, Walmart U.S. posted a 0.3 percent decline in such sales and said they were likely to be flat this quarter.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and Tim Dobbyn)

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Target blames Canada and cautious shoppers as it warns on year

By Jessica Wohl

Wed Aug 21, 2013 1:29pm EDT

n">(Reuters) - Target Corp (TGT.N) warned of weak annual sales and profits on Wednesday as U.S. shoppers remain cautious and its new Canadian stores are not doing as well as anticipated.

Shares of Target fell as much as 4.1 percent to $65.14, their lowest level since March, and were down 3 percent in later trading.

The chain, which competes against Wal-Mart Stores Inc (WMT.N) and other discount retailers with a mix of basic goods, apparel and accessories, posted a second-quarter profit just ahead of expectations while sales missed estimates.

Target said this year's profit should come in at the low end of already reduced expectations and that sales at stores open at least a year should grow just 1 percent rather than 2 to 2.5 percent, as U.S. shoppers remain cautious in the face of ongoing household budget pressures such as higher taxes and gasoline prices.

At the same time, the Canadian business is costing more than Target anticipated and will weigh on full-year profit.

Target opened its first Canadian stores in March after announcing its plans in early 2011. That gave Target time to remodel the stores it bought from Zellers, hire and train thousands of employees and set up its supply chain, but it also gave competitors time to step up their efforts.

"The competitors have really done a good job in defending their space," said Stewart Samuel, program director at IGD Canada, pointing in particular to Wal-Mart, Loblaw Cos Ltd (L.TO) and Shoppers Drug Mart Corp (SC.TO).

Target said it needs to do a better job of advertising low prices on basic goods such as healthcare and food items that bring shoppers in often.

Expenses from Target's Canadian operation cut 21 cents per share from quarterly profit, 5 cents more than it forecast. It expects its Canadian expenses to reduce this year's earnings by 82 cents per share, up from a previous forecast of 45 cents.

"It's definitely gotten off to a slower start than the company expected," said Shawn Kravetz, president of Esplanade Capital LLC, which owns Target shares.

Target has 68 Canadian stores and plans for 124 by the end of the year.

WALMART U.S. DROPS LAYAWAY FEE

In the United States, which remains Target's main market by far, shoppers are visiting less often. Consumer spending on homes and cars is crowding out other spending, and income growth remains weak, said Chief Executive Gregg Steinhafel.

A handful of retailers such as TJX Cos Inc (TJX.N) along with home improvement chains have shown strength but "the rest of retail is sluggish at best," said Kravetz at Esplanade Capital. "Wal-Mart and others made it crystal clear that it is a little bit tougher out there, so that shouldn't be a surprise to anyone."

Separately, Walmart U.S. said its holiday layaway program that starts in mid-September will now be free as it gets rid of an opening fee. Layaway allows a customer to keep a product on hold at the store and pay for it over time and is also being used by chains such as Sears Holding Corp's (SHLD.O) Kmart and by Toys R Us TOYS.UL, but not by Target.

Cowen & Co analyst Faye Landes called Walmart's layaway announcement "a shot across the bow to its competitors, and one that clearly signals intensifying competition ahead of the all-important 2013 holiday shopping season."

Data from an Ipsos poll conducted for Reuters from August 15 to August 19 showed 13 percent of respondents said they were buying more items on layaway this year than last year.

"Our customers are feeling the pinch and they are watching every penny today," Walmart U.S. Chief Merchandising and Marketing Officer Duncan Mac Naughton said on Wednesday.

SALES MISS FORECASTS

In May, Target, noting that shoppers were sticking to shopping lists, trimmed its fiscal-year adjusted earnings per share forecast to a range of $4.70 to $4.90 from $4.85 to $5.05. It now expects a profit near the low end of that range.

Target earned $611 million, or 95 cents per share, in the fiscal second quarter ended August 3, down from $704 million, or $1.06 per share, a year earlier.

Including the effects from opening Canadian stores but excluding other items, Target earned 97 cents per share, one penny more than analysts expected, according to Thomson Reuters I/B/E/S. Second-quarter sales rose 4 percent to $17.12 billion, missing the analysts' target of $17.26 billion.

Target's same-store sales rose 1.2 percent, below analysts' estimate of a 2.1 percent increase and its own forecast of a 2 percent to 3 percent gain. Last week, Walmart U.S. posted a 0.3 percent decline in such sales and said they were likely to be flat this quarter.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and Tim Dobbyn)

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This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Target blames Canada and cautious shoppers as it warns on year

By Jessica Wohl

Wed Aug 21, 2013 1:29pm EDT

n">(Reuters) - Target Corp (TGT.N) warned of weak annual sales and profits on Wednesday as U.S. shoppers remain cautious and its new Canadian stores are not doing as well as anticipated.

Shares of Target fell as much as 4.1 percent to $65.14, their lowest level since March, and were down 3 percent in later trading.

The chain, which competes against Wal-Mart Stores Inc (WMT.N) and other discount retailers with a mix of basic goods, apparel and accessories, posted a second-quarter profit just ahead of expectations while sales missed estimates.

Target said this year's profit should come in at the low end of already reduced expectations and that sales at stores open at least a year should grow just 1 percent rather than 2 to 2.5 percent, as U.S. shoppers remain cautious in the face of ongoing household budget pressures such as higher taxes and gasoline prices.

At the same time, the Canadian business is costing more than Target anticipated and will weigh on full-year profit.

Target opened its first Canadian stores in March after announcing its plans in early 2011. That gave Target time to remodel the stores it bought from Zellers, hire and train thousands of employees and set up its supply chain, but it also gave competitors time to step up their efforts.

"The competitors have really done a good job in defending their space," said Stewart Samuel, program director at IGD Canada, pointing in particular to Wal-Mart, Loblaw Cos Ltd (L.TO) and Shoppers Drug Mart Corp (SC.TO).

Target said it needs to do a better job of advertising low prices on basic goods such as healthcare and food items that bring shoppers in often.

Expenses from Target's Canadian operation cut 21 cents per share from quarterly profit, 5 cents more than it forecast. It expects its Canadian expenses to reduce this year's earnings by 82 cents per share, up from a previous forecast of 45 cents.

"It's definitely gotten off to a slower start than the company expected," said Shawn Kravetz, president of Esplanade Capital LLC, which owns Target shares.

Target has 68 Canadian stores and plans for 124 by the end of the year.

WALMART U.S. DROPS LAYAWAY FEE

In the United States, which remains Target's main market by far, shoppers are visiting less often. Consumer spending on homes and cars is crowding out other spending, and income growth remains weak, said Chief Executive Gregg Steinhafel.

A handful of retailers such as TJX Cos Inc (TJX.N) along with home improvement chains have shown strength but "the rest of retail is sluggish at best," said Kravetz at Esplanade Capital. "Wal-Mart and others made it crystal clear that it is a little bit tougher out there, so that shouldn't be a surprise to anyone."

Separately, Walmart U.S. said its holiday layaway program that starts in mid-September will now be free as it gets rid of an opening fee. Layaway allows a customer to keep a product on hold at the store and pay for it over time and is also being used by chains such as Sears Holding Corp's (SHLD.O) Kmart and by Toys R Us TOYS.UL, but not by Target.

Cowen & Co analyst Faye Landes called Walmart's layaway announcement "a shot across the bow to its competitors, and one that clearly signals intensifying competition ahead of the all-important 2013 holiday shopping season."

Data from an Ipsos poll conducted for Reuters from August 15 to August 19 showed 13 percent of respondents said they were buying more items on layaway this year than last year.

"Our customers are feeling the pinch and they are watching every penny today," Walmart U.S. Chief Merchandising and Marketing Officer Duncan Mac Naughton said on Wednesday.

SALES MISS FORECASTS

In May, Target, noting that shoppers were sticking to shopping lists, trimmed its fiscal-year adjusted earnings per share forecast to a range of $4.70 to $4.90 from $4.85 to $5.05. It now expects a profit near the low end of that range.

Target earned $611 million, or 95 cents per share, in the fiscal second quarter ended August 3, down from $704 million, or $1.06 per share, a year earlier.

Including the effects from opening Canadian stores but excluding other items, Target earned 97 cents per share, one penny more than analysts expected, according to Thomson Reuters I/B/E/S. Second-quarter sales rose 4 percent to $17.12 billion, missing the analysts' target of $17.26 billion.

Target's same-store sales rose 1.2 percent, below analysts' estimate of a 2.1 percent increase and its own forecast of a 2 percent to 3 percent gain. Last week, Walmart U.S. posted a 0.3 percent decline in such sales and said they were likely to be flat this quarter.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe and Tim Dobbyn)

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Analysis: U.S. retailers say uneven recovery keeps consumers cautious

By Phil Wahba and Lisa Baertlein

Fri Aug 16, 2013 1:03am EDT

n">(Reuters) - From Wal-Mart Stores Inc and Gap Inc to Macy's Inc and McDonald's Corp, chains that cater to middle- and lower-income Americans say they are feeling the pinch of an uneven economic recovery.

A host of retailers have reported tepid sales lately, highlighting the stress that consumers are feeling because of higher payroll taxes, expensive gasoline and a slow job market four years after the U.S. economy started to rebound.

"Everyone wants to talk about recovery - it's like the unrecovery," Susquehanna Financial Group analyst Bob Summers said following the Wal-Mart results. "The demographic that they cater to, not only has it not seen improvement, I would argue that things have gotten worse."

Look no further than Macy's for a snapshot of the consumer. For its namesake mid-tier department stores, Macy's reported the first decline in same-store sales in nearly four years this week, and said shoppers had been gravitating to its less expensive items. That's a contrast with Macy's upscale Bloomingdale's, which came in with strong results.

The trend also turns up in results posted on Thursday by Wal-Mart, which emphasizes low pricing. Its U.S. sales at stores open at least a year unexpectedly fell 0.3 percent last quarter, a second decline in a row, prompting the world's largest retailer to lower its sales forecast for the year.

Last week, a group of U.S. retailers including Costco Wholesale Corp and Gap reported modest gains in July same-store sales, thanks largely to bargains.

Adding to the pressure, Macy's said many shoppers are redirecting their spending to their cars, housing and home improvement.

Automakers reported a 14 percent U.S. sales increase in July from a year earlier, industry consultant Autodata Corp said.

Wall Street analysts expect home improvement chain Home Depot to report same-store sales rose 7 percent, the biggest gain of any major retailer Thomson Reuters tracks.

Outside of home improvement and cars, many retailers say economic conditions were less than ideal.

In July, U.S. employers slowed their pace of hiring, with the number of jobs outside of farming increasing less than economists expected.

The average price for a gallon of gasoline in the United States was still high: at the end of July, it was $3.67 compared to $3.51 a year earlier, according to the Lundberg survey.

As of May, 47.6 million Americans, or one in seven, received food aid - highlighting the ongoing strain on Americans struggling to make ends meet. That was 1.1 million more than a year earlier, and 7 million more than in 2010.

Real wages are also stagnating: they fell 0.1 percent between June 2012 and June 2013, according to the U.S. Bureau of Labor Statistics, excluding inflation and civil servants and military personnel.

"The consumer doesn't quite have the discretionary income, or they're hesitant to spend what they do have," Wal-Mart Chief Financial Officer Charles Holley told reporters on a call.

A recent government report showed 5.7 percent of Americans who had jobs in July could not get enough hours to qualify as full-time workers, the same percentage as in June.

While the unemployment rate has fallen steadily over the last year, the share of part-time workers who want more hours has barely dropped, according to BLS statistics.

"Workers are not doing well," said Elizabeth Ashack, an economist at the BLS. "They're losing ground because wages are not growing in real terms."

Teen employment levels are down this summer, and that may be contributing to same-store sales declines at Aeropostale Inc and American Eagle Outfitters.

SPENDING ON ESSENTIALS

The latest batch of retail reports shows the ways in which customers are pulling back again.

Macy's said shoppers at its namesake chain were holding back on anything nonessential, adding it didn't expect to make up the sales shortfall this year and cut its forecasts.

Kohl's said comparable sales had slid for purchases paid for with a credit card, transactions typically made by people on a budget. And both Wal-Mart and Costco said sales of higher-ticket items such as electronics and games have been soft.

Several companies have said shoppers are waiting longer to buy back-to-school items, suggesting they are waiting for deals and that they see no urgency to hit stores.

This week's results may presage more of the same next week, when big chains like Target Corp, J.C. Penney Co Inc and Sears Holdings Corp report earnings.

In May, Target cut its profit forecast after weak sales, and this week Wells Fargo lowered its profit estimates for the discounter saying Target was unlikely to have been spared by the pullback in spending.

The S&P Index retail was down 1.9 percent on Thursday, and many retail experts predicted it will be slow going for the industry for a while.

"The U.S. consumer is weary in this turnaround. It has been quite anemic, relatively speaking. I think many of them just don't see it on Main Street," said Eric Beder at Brean Capital LLC.

(Reporting by Phil Wahba, Atossa Araxia Abrahamian and Dhanya Skariachan in New York, Jason Lange in Washington and Lisa Baertlein in Los Angeles; Editing by Edward Tobin and Lisa Shumaker)

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