Target 2Q Profit Climbs 14%; Card Business Strong Again

By Nathan Becker
Published August 18, 2010
Dow Jones Newswires

Target Corp.'s (TGT: 51.91 ,+0.95 ,+1.86%) fiscal second-quarter earnings rose 14% as the company's credit-card business showed continued strength.

"Our retail segment generated strong profitability, overcoming softer-than-expected sales," said Chairman and Chief Executive Gregg Steinhafel. "Growth in guest traffic and apparel sales remained robust, and teams across the company continued to exercise thoughtful control of expenses."

He also called results at the company's credit-card business "very strong."

In July, Moody's Investors Service lifted its outlook on Target, citing the discount retailer's success in offering merchandise that resonates with its customers and driving foot traffic to its stores, as well as saying the company's problems in its credit business were largely behind it.

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For the quarter ended July 31, Target reported a profit of $679 million, or 92 cents a share, up from $594 million, or 79 cents a share, a year earlier. Total revenue, including the company's credit-card business, rose 3.1% to $15.53 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of 92 cents a share on $15.62 billion in revenue.

Gross margin rose to 32% from 31.9%.

The company's credit-card segment has recently improved because of lower bad-debt expense--including a 54% drop in the most-recent quarter--after weighing on Target's bottom line previously. Its revenue in the latest quarter fell 19% but profit more than doubled on the improved bad-debt costs. Accounts at least 60 days delinquent fell to 5% of receivables from a year-earlier 5.8% and 5.3% in the prior quarter. The 90-day delinquency rate was 3.5%, down from 4.1% and 3.8%, respectively.

Target's shares closed at $50.68 Tuesday and were down 2.1% to $49.61 in premarket trading.

http://www.foxbusiness.com/markets/2010 ... ss-strong/