Target’s profit drops 29% in first quarterNEW YORK – Target Corp. reported a 29 percent drop in first-quarter profit as unusually cool spring weather and financial pressures chilled customers’ appetite for spending.
The company, based in Minneapolis, also on Wednesday cut its annual profit outlook, sending its stock down.
Target is the latest in a string of companies including rival Walmart Stores Inc. that say bad weather and financial pressures like the higher payroll tax have squeezed business in the first couple months of the year.
While chilly weather was a big factor in depressing sales of spring clothing and other seasonal goods, Target said that a yo-yo economic recovery has continued to make shoppers stick to shopping lists and plan their spending.
A big hurdle for many low-price retailers has been tax changes. An increase in the payroll tax of two percentage points, which took effect Jan. 1, means that take-home pay for a household earning $50,000 a year has been sliced by $1,000.
Target said Wednesday that three-quarters of its customers surveyed were aware of this year’s payroll tax increase. Among those, a majority have noticed the impact of the tax increase on their paychecks and indicate it’s affecting their spending.
Still, Target, whose sales growth has been uneven since the recession, remains confident in its strategies to attract shoppers.
Target said it earned $498 million, or 77 cents per share, for the three months ended May 4. That compares with $697 million, or $1.04 per share, a year earlier.