‘Wal-Mart Effect’ Colors Target’s Q2 Results
As early as April, Target (NYSE:TGT) found “softer-than-expected sales trends” to be affecting operations and lowered its first-quarter earnings per share estimate, a move that reflected both a general concern that the U.S. economy was once again slowing down and a more specific concern that the payroll tax had caused low-income earners to cut their discretionary spending.
In May, the company’s results showed that fear was warranted, with a 29 percent decline in first-quarter earnings. As a result, the discount retailer lowered its forecast for the full year, noting once again that customers were keeping purchases to their immediate needs.
While Target reported second-quarter profit Wednesday that met analyst expectations, as a whole, the results clearly showed that customers are remaining cautious in light of higher taxes and unsteady employment. Target joined fellow discount retailers Wal-Mart (NYSE:WMT) and Macy’s (NYSE:M) in reporting second-quarter results that indicated the rough economy is forcing shoppers to limit spending to necessities.