Target profits squeezed by Canadian expansion and low US sales

The November edition of the Business Review Canada is now live!

When Target came to Canada analysts had high hopes for its future, but sales haven't lived up to analyst’s predications.

Target is the second largest discount retailer in the U.S., only overshadowed by currently controversial Walmart. Third-quarter profits fell 46 percent as U.S. consumers pulled back their spending while Canadian expansion affected earnings more than expected. The third-quarter ending Nov. 2 slid from $637 million last year to $341 million.

"It is challenging for retailers because things are OK out there, they're not good," said Shawn Kravetz, president of investment firm Esplanade Capital, which owns Target shares. "So retailers are getting more aggressive. Everything's a bit tighter."

Read related content:

• Nine Target stores to open in Quebec
• Air Canada profits exceed estimates
• Ford Investing $700 Million In Oakville, Ont Plant

Target is not the only company that is struggling for sales as additional retailers reported disappointing sales on Thursday. Dollar Tree Inc comparable sales rose a less-than-expected, 3.1 percent, and Sears Holdings Corp reported that U.S. comparable stores fell 4 percent.

Abercrombie & Fitch Co, struggling with the defection of many teenage shoppers, forecast a double-digit percentage decline in comparable sales in the holiday quarter, which is no surprise considering its CEO aversion to anyone over a size zero.

Target Canada opened eight new stores in Quebec on November 13 and is planning on opening a ninth on November 22. The opening will represent a portion of its final openings program across Canada in 2013.

The openings on November 13 included, Carrefour Angrignon, Centre Laval, Place Longueuil, Place Alexis Nihon, Pointe Claire, Quebec City, Saint-Jean-de-Richelieu and Rimouski.