P&L

Target joins the “blame-the-weather” club

May 22, 2013
May 22, 2013
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The numbers: Weak. Target warned investors that this quarter would be ugly. Total quarterly revenues declined by 1%. Profits declined by 29%. Same-store sales fell 0.6% and the company cut its profit outlook for 2013 (paywall). The stock fell.

The takeaway: It’s been cold. Target blamed a chilly spring for weak sales of apparel. It’s true that US weather has been dismal. But not everyone is suffering equally. For instance, Macy’s generated decent earnings despite the cold and damp. On the other hand, the world’s largest retailer, Wal-Mart, also had a tough quarter, which it pinned, in part, on that payroll tax increase we’ve been talking about.

What’s interesting: On the post-earnings call analysts will be looking for indications on how Target’s foray into smaller, urban settings is going. The company has said it was pleased with the first three of the urban-sized CityTarget stores it opened in Seattle, Los Angeles and Chicago last summer. (It opened a total of five CityTargets in 2012 and is planning three more in 2013.) The stores are about two-thirds as big as a regular Target, stock fewer products, and cater to customers who make more frequent visits to buy fewer things. Target has found slightly better-than-expected profit margins at these stores; perhaps urban shoppers are used to paying higher prices than their suburban counterparts. Target is also toying with a separate brand of stores to sell its C9 brand of sportswear, a profitable niche.

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