November 17, 2009
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News: Target Performs Better Than Expected
Retailers and credit card companies are gearing up for a tough holiday shopping season. Although optimistic, retailers are being cautious. Target Corp (TGT) released its fiscal third quarter numbers which were better than expected. While earnings increased by 18 percent, the major retailer posted $435 million in profits up from $369 million same time last year. The increase was the first the company experienced in over two years. Target's credit card division contributed significantly to the increase with a whopping 72 percent profit increase. Credit card defaults decreased by 4.1 percent; however the company has set aside another 2.1 percent for future write-offs.
In line with the major lenders, Target's credit card delinquencies of 60 days or more also increased to 6.5 percent up from 5.6 percent same time last year and 5.8 percent from the second quarter. Credit card accounts that were delinquent 90 days or more also increased to 4.6 percent from 3.8 percent same time last year and 4.1 percent from second quarter. Analysts had forecasted the company's revenue to increase slightly to $15.25; however, Target outperformed expectations with an increase of 1.1 percent to $15.28 billion despite a same store sales drop of 1.6 percent. The ever important gross margin also increased slightly to 30.8 percent from 30.6 percent.
Over the past two years in the wake of the recession, Target lost sales to its lower priced competitor Wal-Mart while also dealing with high credit card losses. Third quarter figures are a welcome site for the company. Target's Chairman and Chief Executive Officer, Gregg Steinhafel stated that the company was pleased with the profitability figures and attributed the phenomenal credit card division's performance to a well managed portfolio. Additionally, in spite of the better than expected performance, the company is moving cautiously forward with a conservative plan for the holiday shopping season.