Target Corp. muted its annual profit forecast Wednesday after reporting a 13 percent drop in second-quarter profits as the cheap-chic retailer deals with cautious shoppers.
Target is the latest in a string of companies, including rival Wal-Mart Stores Inc., that have lowered their business expectations as they contend with an uncertain economy.
“For the balance of this year, our U.S. outlook envisions continued cautious spending by consumers in the face of ongoing household budget pressures,” said Gregg Steinhafel, Target’s chairman, president and CEO, in a statement.
While jobs are easier to get and the housing market is gaining momentum, these improvements have not been enough to translate into consumer spending. And there has been stagnant wage growth.
Also, a 2 percentage-point increase in the Social Security payroll tax has been in effect since Jan. 1. That means take-home pay for a household earning $50,000 a year has been sliced by $1,000.
Target said it earned $611 million, or 95 cents per share, in the quarter ended Aug. 3. That compares with $704 million, or $1.06 per share, a year earlier.
Excluding certain items related to its expansion into Canada, the retailer earned $1.19 per share.
Total revenue reached $17.12 billion, up 2 percent from $16.45 billion in the quarter.
Analysts expected earnings of 96 cents per share on revenue of $17.28 billion, according to research firm FactSet.
Revenue at stores open at least a year rose 1.2 percent, below the 1.9 percent analysts had expected.
Target, whose sales growth has been uneven since the recession, has been seeking ways to pull in new shoppers.
It has reached out to customers with a larger selection of food and another program, started in 2010, gives shoppers a 5 percent discount when they pay with Target-branded credit and debit cards.
At the same time, Target continues to team up with new designers for limited-time partnerships. Next month, Target is set to launch its latest designer collaboration, with Phillip Lim.
For the current quarter, Target expects earnings per share to be in the range of 80 cents to 90 cents. Analysts projected 89 cents per share, according to FactSet.
For the full year, Target now expects earnings per share to be at the low end of its previous guidance of $4.70 to $4.90.