Profits not on Target

Photo: The Canadian Press. All rights reserved.

Customers enter a Target store in in Guelph, Ont. on March 5, 2013. THE CANADIAN PRESS/Dave Chidley

Target Corp. reported a 26 per cent drop in first-quarter profit as cool temperatures and financial pressures limited customers' appetite for spending.

The company, based in Minneapolis, also cut its annual profit outlook, sending its stock down in premarket trading.

Target is the latest in a string of companies including rival Wal-Mart Stores Inc. that underscore how weather and other pressures on lower- to middle-income shoppers hurt business in the first couple months of the year.

Still, Target, whose sales growth has been uneven since the recession, remains confident in its strategies to attract shoppers.

Target has reached out to customers with two big growth initiatives. It has been offering a larger selection of food and also a program, started in 2010, that gives shoppers a 5 per cent discount when they pay with Target-branded credit and debit cards.

At the same time, Target continues to team up with new designers for limited-time partnerships. Earlier this month, Target announced its latest designer collaboration, with Phillip Lim. The collection is due out in September.

Last year, Target expanded into urban markets using smaller versions of its big-box stores in Seattle, Los Angeles and Chicago.

Target also started to expand into Canada earlier this year, its first foray outside the U.S. The company is opening the stores in waves that should add up to about 125 stores at locations once owned by Canadian retailer Zellers by the end of the year.

The company opened in Vernon on May 7, the Kelowna store is expected to open over summer.