Target may not cater to exactly the same shopper as Walmart, but there is enough overlap between the two companies to know that reports of weakness out of Minneapolis are never a good sign in Bentonville.
Walmart was already expecting same store sales for its first quarter to be flat following a slow start in February and a challenging comparison against a prior year increase of 2.6%. Walmart is due to report first quarter results on May 16 and the prospect of a negative comp performance at its U.S. stores division appears real following recent weakness at Target and Family Dollar.
Target this week lowered its first quarter expectations and said it believes first quarter comps will be flat, after previously forecasting a range of flat to 2% growth. The softer than expected sales also caused the company to revise its first quarter adjusted profit expectations to an unspecified level of "slightly below" earlier guidance of $1.10 to $1.20.
The sales weakness was characterized as softer than expected, but it was hardly surprising considering Target chairman, president and CEO Gregg Steinhafel along with Walmart U.S. president and CEO Bill Simon expressed reservations about the strength of the economy back in February.
More recently, Family Dollar reported what for it was a puny comp increase of 2.9% for its second quarter ended March 2. It is conceivable that Walmart contributed to weakness at Target and Family Dollar, but a more likely explanation is it too has experienced the effects of reduced consumer spending the extent of which will be evident a month from now.