JWN Nordstrom Inc

By Khadeeja Safdar and Lisa Beilfuss 

Target Corp. on Wednesday warned that weaker consumer spending will continue to weigh on its performance after hitting sales growth in the recent quarter.

Chief Executive Brian Cornell blamed "an increasingly volatile consumer environment" and said Target's view of second-quarter results "has been tempered by the recent slowdown in consumer trends."

Shares fell 9.4% to $66.67 in recent trading.

Sales at existing stores rose 1.2% in the quarter ended April 30, short of Target's 1.5% to 2.5% annual target. The company warned the metric would be flat to down 2% in the current quarter. A decline would be a first for Target since Mr. Cornell took over as CEO in 2014.

Target joins a growing list of retailers reporting a disappointing start to the year. Last week, soft results from department stores like Macy's Inc. and Nordstrom Inc. illustrated shoppers' shift away from brick-and-mortar stores and sparked declines across the retail sector. That pressure was renewed Wednesday as shares in Wal-Mart Stores Inc. fell 3.5% and club store operator Costco Wholesale Corp, fell 3.2%. Wal-Mart is scheduled to report quarterly results Thursday.

But off-price chain TJX Cos. and home-improvement stores like Home Depot Inc. reported healthy traffic and spending at their locations, suggesting that consumers are willing to spend but are being more selective about where.

Recent data from the U.S. Commerce Department showed that consumer spending in April rose to the best level in more than a year. In the past year, Internet and catalog sales have grown more than three times as fast as overall sales, up 10.2%, while department-store sales sank 1.7% over the past 12 months.

Despite weakness in the first half of the year, Target said it still sees its full-year earnings forecast as "achievable." Mr. Cornell said the spending slowdown at the start of the year was the result of consumer caution and unusually cold and wet weather.

"It's been a very wet and cold start to the year and it's reflected in our sales," he said. "We haven't seen anything from a structural standpoint that gives us pause."

The company said home sales were a bright spot in the period, growing 4%, while electronic sales continued to decline despite the growth in wearable fitness-tracking devices.

The Minneapolis company has been spending aggressively to beef up digital sales in a retail environment where foot traffic is dwindling and more Americans are making purchases from Amazon.com Inc. and other online retailers.

In the first quarter, Target's digital sales rose 23%, down from a 38% clip a year earlier. Online sales represented 3.5% of Target's top line, a smaller chunk than the 5% achieved in the holiday period, though up from 2.8% a year earlier.

Aside from working to boost digital sales, Mr. Cornell has been trying to reshape the company by fixing stores and improving merchandise selection. Target has been working to revamp its food business by adding organics and fresh offerings.

In his latest move announced Tuesday, Mr. Cornell hired Nordstrom veteran Mark Tritton to be Target's next chief merchandising officer, filling the position vacant since last summer.

Overall for the quarter, Target reported a profit of $632 million, down from $635 million a year earlier. Revenue declined 5.4% to $16.2 billion, largely due to the sale of its pharmacy and clinic businesses to CVS Health Corp. Analysts had forecast $16.32 billion in revenue, according to Thomson Reuters.

For the current quarter, Target expects to post $1 to $1.20 in adjusted earnings per share, well below the $1.36 analysts have projected.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com and Lisa Beilfuss at lisa.beilfuss@wsj.com

(END) Dow Jones Newswires

May 18, 2016 11:35 ET (15:35 GMT)

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