• Q1 profit declined 28.5% to $498m 
  • Sales climbed 0.5% to $16.6bn
  • Company lowered full-year EPS guidance 

General merchandise retailer Target Corporation has lowered its full-year earnings outlook after higher interest charges as well as soft apparel sales weighed on first-quarter profits.

The company today (22 May) said net earnings declined 28.5% to US$498m for the three months to 4 May, compared to $697m the prior year.

Net interest expense increased to $629m in first quarter from $184m last year, due to a $445m charge related to the early retirement of debt.

Net sales climbed 0.5% to $16.6bn from $16.5bn last year, while comparable store sales edged down 0.6%. The retailer opened its first 24 Canadian stores in March, which generated sales of $86m.

Gross margin, meanwhile, increased to 30.7% in 2013 from 30.2% last year.

"Target's first quarter earnings were below expectations as a result of softer-than-expected sales, particularly in apparel and other seasonal and weather-sensitive categories," said chairman, president and CEO Gregg Steinhafel.

"While we are disappointed in our first quarter performance, we remain confident in our strategy, and we continue to invest in initiatives, including Canada, our digital channels and CityTarget, that will drive Target's long-term growth."

Looking forward, Target now expects full-year adjusted earnings per share of $4.70-4.90, down from its previous guidance of $4.85-5.05.