Minneapolis, MN, July 18, 2006--Slower-than-expected July sales growth at Target raised concerns that consumer spending was finally succumbing to high gasoline prices and a slowing housing market, analysts said on Tuesday.
Target on Monday said it now expects 3 percent to 4 percent growth in July sales at its stores open at least a year--a key retail measure known as same-store sales. The retailer had originally forecast 4 percent to 6 percent growth.
"We believe the weakening housing market and prospects of high oil and gasoline prices, along with other negatives, will during the next few quarters pressure same-store sales for Target and other retailers," A.G. Edwards analyst Robert Buchanan wrote in a note to clients.
He lowered his rating on Target to "hold" from "buy."
Consumer spending accounts for some two-thirds of U.S. economic activity, so Wall Street has been watching closely for any sign of a slowdown. Spending proved resilient through last summer's oil price spike, but analysts have noted some recent signs of a pullback.
June same-store sales were slightly weaker than expected for the retail sector, which prompted concerns that the consumer may be wavering.
Target, second to Wal-Mart in the U.S. discount segment, had posted slightly better-than-expected June sales, however, and said second-quarter earnings would likely meet or exceed expectations.
