May 22, 2009
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News: Target CC Business Stabilizing
As the recession continues, consumers are finding smarter ways to shop. That’s good news for discounters like Target who have revamped their marketing strategies to accommodate a more frugal customer and manage credit card losses. Results are proving positive as Target announces a higher than predicted profit of 69 cents per share versus the 60 cents per share forecasted. Target, the nations number two discount retailer, watched profits fall 13% to $522 million for first quarter from $602 million same time a year ago. Although sales remain weak, Target attributes the positive results to its credit card business which reported a profit of $39 million. Credit Card profits were down from $181 million same time last year; however, fourth-quarter pretax losses showed an improvement. The results mark an improvement from the previous quarter when profits fell nearly 41%.
Target says they responded to the increased credit card delinquencies and write-offs by reducing inventory levels, cutting costs, and increasing their bad credit card fund. The merchant also observed a growing demand for food products. In response, Target placed more emphasis in developing the canned and boxed staples portion of their food business. Additionally, they are currently testing a new concept in select stores with frozen foods and perishable items. The merchant’s expanded marketing strategies and hard work appear to have paid off. Target realized a modest increase in sales of $14.4 billion compared to $14.3 billion. New stores contributed to the increase as same store sales dropped 3.7 percent. The positive results indicate a modest upswing in Targets business as consumers appear to be slowing regaining their trust and confidence in the economy.
The company acknowledges that consumers continue to monitor their spending habits as they stick to buying only what’s on their shopping lists. Target reports that the modest change in consumer spending is evident in both the retail and credit card business. They expect to go forward by continuing to educate the consumer on their competitive prices and food product offerings. Target is traded on the New York Stock Exchange under the symbol TGT.