Target aims for higher profit, shares rise

(Reuters) - TARGET (TGT.NY)Corp raised its annual forecast after posting a bigger-than-expected rise in quarterly profit on Wednesday even as it spends more on plans to open stores in Canada, and has concerns about U.S. shoppers' ability to spend.

The discount chain expects economic uncertainty to continue for the rest of 2012, Chairman and Chief Executive Gregg Steinhafel said in a statement.

Shares of Target, whose first-quarter sales got a boost from warm weather and an early Easter, rose 1.5 percent, or 90 cents, to $55.97 in early trading.

"Consumers are not buying more at Target, what's driving their sales is maybe people are shopping a bit more often," said Brian Sozzi, chief equities analyst at NBG Productions. "It's not like people are going in and loading up their baskets as much as they were a couple of years ago."

The number of transactions at Target stores open at least a year rose 2 percent, while the number of items per transaction rose just 0.6 percent. Selling prices were 2.6 percent higher than a year ago.

Target, which sells basic goods such as soap and paper towels along with limited-edition items from the likes of designer Jason Wu, has been seeing more customers shop using its credit cards, which offer a 5 percent discount and free online shipping.

It has added a wider variety of food including fresh produce to more of its stores. Other chains, such as Dollar General and Family Dollar are also attracting shoppers with more food items.

Target earned $697 million, or $1.04 per share, in the first quarter that ended in April, up from $689 million, or 99 cents per share, a year earlier.

Target is preparing for its 2013 entry into Canada and said costs related to its first international expansion cut about 8 cents per share from its quarterly profit. In 2011, it spent about 17 cents per share on Canada.

Excluding the Canada costs, adjusted earnings per share of $1.03 topped analysts' expectations of $1.01, according to Thomson Reuters I/B/E/S.

HIGHER EXPECTATIONS

The company raised its fiscal-year profit view 5 cents per share. It now expects to earn $4.60 to $4.80 per share on an adjusted basis, and $4.10 to $4.30 on a GAAP basis this year.

For the second quarter, it anticipates earning $1.04 to $1.14 per share on an adjusted basis and 94 cents to $1.04 per share on a GAAP basis.

Analysts expect Target to earn $4.28 per share this year and 99 cents per share this quarter.

"They set the bar high and the trends in their business, in my opinion, I don't know if they support that," Sozzi said.

Sales at stores open at least a year, or same-store sales, rose 5.3 percent, the strongest quarterly performance in more than six years, Target previously said. That fell short of analysts' average forecast of 5.6 percent growth, according to Thomson Reuters.

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While same-store sales missed analysts' raised expectations, Target is still growing faster than rival Walmart U.S., the largest unit of Wal-Mart Stores Inc . Analysts expect Walmart U.S. to post a 1.4 percent rise in same-store sales when Wal-Mart issues its results on Thursday.

Target's sales rose 6.1 percent to $16.54 billion. Total revenue, including credit-card revenue, rose 5.9 percent to $16.87 billion.

Target said 11.6 percent of sales in its stores were paid for with its REDcard credit and debit cards. A year ago, only 7.6 percent of sales were paid for with the cards.

(Reporting by Jessica Wohl in Chicago; Editing by Maureen Bavdek)

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