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updated: 5/22/2013 8:06 AM

Target first-quarter profit falls 29% as weather damps sales

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Bloomberg News

Target Corp., the second-largest U.S. discount retailer, said first-quarter profit fell 29 percent as higher taxes and cooler temperatures hampered sales.

Net income in the quarter ended May 4 dropped to $498 million, or 77 cents a share, from $697 million, or $1.04, a year earlier, the Minneapolis-based company said today in a statement. Sales rose 1 percent to $16.7 billion.

U.S. retailers have been struggling as an increase in Social Security taxes takes a larger bite out of shoppers' paychecks while colder-than-normal temperatures hurt sales of spring merchandise. Target last month said profit in the quarter would be less than it previously forecast.

"Unfavorable weather and higher payroll tax rates weighed on spring spending across most of the retail landscape," Sean Naughton, an analyst at Piper Jaffray Cos. in Minneapolis, wrote in a note May 14. He rates the shares overweight, the equivalent of a buy.

Target fell 1.8 percent to $70.01 at 7:36 a.m. in New York. The shares had gained 20 percent this year through yesterday, compared with a 17 percent increase for the Standard & Poor's 500 Index.

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