Target lowers Q1 sales and profit forecast

Softer than expected sales trends prompted Target to lower its first quarter earnings outlook Tuesday morning.

The company said it now expects first quarter comps to be flat, after previously forecasting a range of flat to 2% growth. The softer than expected sales prompted the company to revise first quarter adjusted profit expectations to an unspecified level of "slightly below" earlier guidance of $1.10 to $1.20.

The reduced guidance was offered as part of a financial update connected to the company’s recent settlement of a debt tender offer and credit card portfolio sale. According to the company, factors contributing to the reduction included losses related to the early retirement of debt of approximately $445 million, or 41 cents per share and expected earnings per share dilution of 23 cents related to the company’s Canadian segment somewhat offset by accounting gains of approximately 36 cents associated with the sale of Target’s entire consumer credit card receivables portfolio to TD Bank Group.

The sales weakness was characterized as softer than expected, but Target chairman, president and CEO Gregg Steinhafel did offer a heavy dose of pessimism when sharing his first quarter outlook back in February when fourth quarter results were reported.

"As we enter 2013, we will plan appropriately, as the U.S. economy is growing at a painfully slow rate and unemployment remains persistently high," Steinhafel said during the company’s fourth quarter conference call. "While there are some encouraging signs in the housing market, volatility in consumer confidence, the payroll tax increase, and rise in the price of gas all present incremental headwinds. Given these new challenges facing an already sluggish economy, we have a tempered view of the near-term sales environment."

Despite the first quarter weakness, Target maintained its full year profit forecast which calls for adjusted earnings per share in the range of $4.85 to $5.05.

Target currently operates 1,784 in the United States and 24 units in Canada.