Canadian expansion cuts into Target's second quarter profit

Target Corp. is reporting a 13 per cent drop in second-quarter earnings as the discount retailer spent money on opening stores in Canada and dealt with cautious shoppers in the United States.

The Minneapolis-based discounter, which began entering the Canadian market for the first time in March and had 68 stores in the country by the end of the second quarter, is offering a muted full-year outlook.

“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 Target chief executive and chairman Gregg Steinhafel.

“In Canada, where we are only five months into our market launch, we continue to learn, adjust and refine operations in our existing stores as we prepare to open another 56 stores by year-end.”

Target (NYSE:TGT) estimates its third quarter adjusted earnings per share will be between 80 and 90 cents US and net income will be between 55 cents and 65 cents. The adjusted EPS excludes 22 cents related to Canadian operations and three cents related to a non-operating asset in the third quarter.

The company also says its 2013 full-year adjusted earnings will be near the low end of its previous guidance of $4.70 to $4.90 per share.

Target says 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 items, the retailer earned $1.19 per share. Target said its Canadian segment accounted for 21 cents of unusual items during the second quarter.

Total revenue reached $17.12 billion, up two per cent from $16.45 billion in the quarter. The Canadian segment generated US$275 million of the revenue.

Analysts had estimated Target’s earnings would be 96 cents per share on revenue of $17.28 billion, according to FactSet.

Revenue at Target stores open at least a year rose 1.2 per cent, below the 1.9 per cent analysts had expected.

With a report from The Associated Press