Earnings reports released on Wednesday afternoon from BJ’s Wholesale Club and Target show that consumers are spending cautiously due to higher gas and food prices. The results demonstrate discretionary spending; meaning retailer margins could remain pressured this year.
Investors are most concerned with the prospects for Target, as shoppers are purchasing food and necessities, but avoiding non-essential purchases.
During a conference call, Target CEO George W. Steinhafel predicted a slow economic recovery, especially for low to moderate income families.
Target also has plans to close on many Canadian leases sooner than originally planned, which will lead to higher prices this year.
Target announced in January that they intend to purchase the leases on 220 Zellers bargain stores, and plans to open its first store in Canada in 2013. Closing these deals sooner than predicted will push its associated costs into this fiscal year, rather than next.