Target's 3Q results to reflect shoppers' mindset

Target's 3Q results to reflect customers' worries as holiday season looms

Associated Press

NEW YORK (AP) -- Target Corp.'s third-quarter financial results Thursday should offer clues into shoppers' mindset for the all-important holiday season.

WHAT TO WATCH FOR: Target, which sells affordable, trendy clothes and home decor under the same roof as toothpaste and cereal, has experienced choppy business heading into the holiday season.

In the U.S., while jobs are easier to get and the housing market is gaining momentum, these improvements have not been enough to get most Americans to spend. Many shoppers are grappling with stagnant wage growth. On top of that, Americans continue to struggle with a 2 percentage-point increase in the Social Security payroll tax since Jan. 1.

Investors will also want to know whether Target shoppers are pulling back because they're worried about rising health care costs. Another potential problem: the Nov. 1 expiration of a temporary boost in government food stamps could also hurt customers' ability to spend.

Target's results come after its chief rival Wal-Mart Stores Inc. posted results that reflect that its low-income shoppers are still struggling. It announced last week that a key revenue measure — revenue at stores opened at least a year — fell for the third straight quarter in a row. It also cut its annual outlook for the second time in three months and gave fourth-quarter guidance that's below Wall Street's expectations.

That doesn't bode well for Target, whose customers overlap with Wal-Mart's.

Target, whose sales growth has been uneven since the recession, has been seeking ways to pull in new shoppers.

Target has tried to lure 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 percent 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. This past fall, Target launched its latest designer collaboration, with Phillip Lim.

To woo holiday shoppers, Target is counting on a number of strategies. So investors will want an update on how early holiday sales in November are faring.

Like many other stores, Target is opening earlier for the traditional kickoff. It's opening at 8 p.m. on Thanksgiving day, an hour earlier than a year ago. Target also said that for the first time it will launch a TV ad campaign on Dec. 1 through Dec. 3 specifically focusing on Cyber Week deals including Cyber Monday. Marketers started promoting the Monday after Thanksgiving as "Cyber Monday" in 2005 to push people to shop online.

WHY IT MATTERS: Target's size, its sweep across American consumer markets and its broad offerings make it a barometer of consumer spending, which is an important part of the U.S. economy.

WHAT'S EXPECTED: For the third quarter, analysts on average expect the Minneapolis-based chain to report 64 cents per share on revenue of $17.4 billion, according to FactSet.

LAST YEAR'S QUARTER: A year ago, Target earned 81 cents per share on revenue of $16.93 billion.

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