NEW YORK (AP) — Target is setting its bullseye on Canada in 2013.
Its investment in a Canadian launch this year and weaker-than-expected holiday sales caused Target Corp.'s net income to fall 2 percent in the fourth quarter of last year. But the second largest discounter in the U.S. said its foray into Canada, policy of matching competitors' prices and new designer lines will help its business this year.
"We believe that we are well positioned to succeed even in this uncertain environment, said CEO Gregg Steinhafel said in a call with investors.
The big-box retailer, known for its cheap but trendy merchandise, pulled out all the stops to lure in cautious shoppers during the winter holiday season, which runs from November through December. It launched a line of gifts created by 24 high profile designers in partnership with luxury department store Neiman Marcus and offered to match prices of online competitors such as Amazon.com, Walmart.com, Bestbuy.com and Toysrus.com.
But the initiatives did not spur customers to buy more during the period, a time when retailers can make up as much as 40 percent of their annual revenue. In fact, Target noted that sales "bar belled," meaning that they were strong around Black Friday, the busy shopping day after Thanksgiving, and the days before and after Christmas, but not in between.
Overall, Target's number of transactions fell 1 percent during the quarter, although the amount spent per transaction rose 1.4 percent. The company said its gross margin — the percentage of each dollar in revenue made that a company actually keeps — declined during the quarter due to holiday markdowns.
Edward Jones analyst Brian Yarbrough said the problem during the holidays was seasonal merchandise that didn't sell during a slow December. But overall it was a decent report, he added.
"Results were in-line, and forward guidance was pretty solid," he said.
Many had wondered how Target would do now that consumers are being squeezed by an increase in the Social Security payroll tax of 2 percentage points that was rolled out last month. Burger King and Wal-Mart have already noticed a pull-back from the tax hike.
Steinhafel did not mention an effect in the fourth quarter, but said that the payroll tax increase was one of several challenges that are giving the company a "tempered" view of revenue in 2013.
"While there are some encouraging signs in the housing market, volatility in consumer confidence, the payroll tax increase and rise in the price of gas all present incremental headwinds," Steinhafel said Wednesday in a call with analysts.