Target cuts forecast as it woos back customers with more discounts

Target Corp cut its full-year earnings forecast as it offers more discounts to attract cash-strapped customers and win over shoppers unnerved by a massive holiday-season data breach.

The third-largest U.S. retailer, however, said sales and traffic have improved in the past few weeks as the back-to-school season begins.

Target's shares rose 1 percent to $59.81 in noon trading.

The company's U.S. same-store sales rose more than 1 percent in July, Chief Financial Officer John Mulligan said in a statement. Sales have been "better" in August, driven by demand for back-to-school items, he said.

Sales at U.S. mass merchandisers such as Target and Wal-Mart Stores Inc have been hit this year as consumers struggling with stagnant wages and high inflation reduce spending.

On top of that, Target has run up big losses in Canada, where its ambitious expansion has stumbled due to supply chain issues and a backlash from customers who had expected prices to be more in line with those in the United States.

Target's same-store sales have either declined or failed to show growth in the past six quarters. Customer traffic has fallen for nine straight quarters, but is now showing signs of recovery.

The fall in traffic slowed to 1.3 percent in the second quarter from 2.3 percent in the first quarter.

"A vast majority of guests have come back to us ... Trust and confidence is returning to Target," Mulligan said on a call, adding that discounting was a contributing factor.

Target replaced its CEO Gregg Steinhafel with former Wal-Mart executive Brian Cornell after the data breach in the holiday shopping season last year led to the theft of at least 40 million payment card numbers and 70 million other pieces of customer data.

"I think slowly and maturely that the confidence is coming back and bulk of the shoppers shopping there again are getting comfortable," Edward Jones analyst Brian Yarbrough told Reuters.

FORECAST CUT

Still, Target cut its full-year adjusted profit forecast to $3.10-$3.30 per share from $3.60-3.90, saying it was cautious due to sales and margin trends so far this year.

Analysts on average were expecting $3.49 per share, according to Thomson Reuters I/B/E/S.

Target said earlier this month that the data breach had cost it a net $111 million so far after taking insurance into account.

The company did not provide an updated figure on Wednesday.

Net profit fell 62 percent to $234 million, or 37 cents per share, in the quarter ended Aug. 2.

Excluding items, the company earned 78 cents per share.

Total sales rose 1.7 percent to $17.41 billion.

Analysts on average expected earnings of 79 cents per share, and revenue of $17.38 billion.

(Editing by Ted Kerr and Kirti Pandey)