Target Profits Surge on Food Sales, Credit Card

Target Corp. reported that its third-quarter earnings rose 22.6 percent in the third quarter, helped by improvements in its credit card business and expansion into food.

The cheap-chic retailer also projected a strong holiday, saying it expects an important sales measure to rise more sharply than it has in three years.

The discounter posted net income of $535 million, or 74 cents per share, in the quarter ended Oct. 30. That compares with $436 million, or 58 cents per share in the year-ago period.

Revenue rose 2.2 percent to $15.61 billion.

Analysts surveyed by Thomson Reuters forecast earnings of 68 cents per share on revenue of $15.61 billion.

Within its credit card segment, profit increased to $130 million from $60 million a year ago, as bad debt expense declined 64 percent to $110 million from $301 million in the year-ago period.

Target is counting on drawing more shoppers this holiday season with a 5 percent discount for people who pay with its store-branded credit and debit cards. The offer was launched Oct. 17.

The discounter is also counting on benefits from revamping its stores across all areas, from improved electronics displays to better lighting in its cosmetics area. The big draw, however, is an expanded area for fresh food at its general merchandise stores.

Target’s revenue at stores open at least a year rose 1.6 percent in the quarter, in line with its original forecast of anywhere from 1 percent to 3 percent. The measure is considered a key indicator of a retailer’s health because it excludes the effects of stores that open or close during the year.

Target’s CEO Gregg Steinhafel said last week when the company reported October revenue results that traffic was healthy in stores but the company is seeing essentials such as food selling better than discretionary items. That’s a sign that consumers are still squeezed for cash or cautious about spending.

That translated to the average customer’s total purchase shrinking 0.5 percent, but more customers came into its stores, fueling a 2.1 percent increase in transactions. Selling price per item fell 3.3 percent.

Target is based in Minneapolis.

ANNE D'INNOCENZIO, AP Retail Writer NEW YORK