Target reported a net income of $611 million during the second quarter, a decline of 13 percent from the same period last year. Meanwhile, sales at stores open at least a year rose just 1.2 percent.
Company officials said consumers are keeping a tight grip on their wallets, which is hurting sales and profits.
Many people are still worried about the economy and adjusting to the January increase in the Social Security payroll tax that reduced take-home pay, said Kathryn Tesija, Target's executive vice president for merchandising.
"In surveys regarding expected spending on back-to-school and back-to-college items, consumers indicate they intend to spend less than a year ago by focusing on sales, discounts and reusing items they already own," she said.
Target is the latest in a string of companies, including rival Walmart, that have lowered their business expectations as they contend with an uncertain economy. Target's stock price had fallen more than three percent by noon today to about 65.70 a share. For investors, the big concern about Target is its expensive and so-far disappointing performance in Canada, Edward Jones retail analyst Brian Yarbrough said.
"They've got not enough inventory in some categories and too much inventory in other categories," Yarbrough said. "Originally, the sales started off really strong. So, they put a lot of people in the stores and investments into them and now all of sudden, sales are really slow. There are a lot questions around that because this is huge, huge expenditure." Target officials say at five months into the Canada expansion they continue to "learn, adjust and refine operations" there.