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Target's 1Q results to offer clues on economy

NEW YORK (AP) -- Target Corp.'s first-quarter financial results Wednesday should offer insight into how its shoppers are grappling with a payroll tax and other financial issues.

WHAT TO WATCH FOR: Target, which sells cheap, trendy clothes and home decor under the same roof as toothpaste and cereal, is expected to offer clues as to how the spring selling season shaped up for the discounter.

Target's results come a week after its rival Wal-Mart Stores Inc., the world's largest retailer, reported that both revenue and profit missed Wall Street projections. The Bentonville, Ark.-based discounter blamed a number of factors affecting its budget-conscious customers, including a payroll tax increase, delayed tax refunds, job worries and bad weather.

Analysts will dissect how shoppers have been affected by the tax changes implemented earlier this year. An increase in the payroll tax of two percentage points, which took effect Jan. 1, means that a take-home pay for a household earning $50,000 a year has been sliced by $1,000.

Target, whose sales growth has been uneven since the recession, has been seeking new ways to pull in new 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 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. Earlier this month, Target announced its latest designer collaboration, with Phillip Lim. The collection is due out in September. That follows a recent disappointment with its partnership with luxury merchant Neiman Marcus. The two jointly offered a limited collection spanning from fashion to sporting goods for the winter holidays, but the strategy failed to drum up the excitement among its customers as it expected.

Last year, Target expanded into urban markets using smaller versions of its big-box stores in Seattle, Los Angeles and Chicago. Analysts will want to know how the new locations are faring.

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.

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 first quarter, analysts on average expect the Minneapolis-based chain to report 95 cents per share on revenue of $16.85 billion, according to FactSet.

LAST YEAR'S QUARTER: A year ago, Target earned $1.04 per share on revenue of $16.86 billion.