Target profit shows pickup in consumer spending

CHICAGO Wed May 19, 2010 9:27am EDT

Shoppers exit a Target store with their purchases in Fairfax, Virginia, in this February 4, 2010 file photo. REUTERS/Stelios Varias/Files

Shoppers exit a Target store with their purchases in Fairfax, Virginia, in this February 4, 2010 file photo.

Credit: Reuters/Stelios Varias/Files

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CHICAGO (Reuters) - Discount retailer Target Corp (TGT.N) and warehouse club operator BJ's Wholesale Club Inc BJ.N posted higher-than-expected quarterly earnings as consumers began to spend on more than just everyday basics.

Target specifically cited sales of more profitable items like apparel.

The results at Target also highlighted a split in U.S. consumer spending, as its sales at stores open at least a year rose 2.8 percent, while much larger rival Wal-Mart Stores (WMT.N) posted a worse-than-expected drop at its U.S. discount stores on Tuesday.

The core Wal-Mart customer is skittish about high unemployment and rising gasoline prices, analysts said, while consumers with even slightly more economic stability are shifting back to retailers like Target and department stores as the recession recedes.

Target's profit rose to $671 million, or 90 cents per share in the first quarter ended May 1 from $522 million, or 69 cents a share, a year earlier.

Analysts on average forecast 86 cents, according to Thomson Reuters I/B/E/S.

Target said its credit card business did much better than expected due to a sharp reduction in bad debt expense from a year earlier. Profit in the segment jumped to $111 million from $39 million.

CANDY, HOUSEWARES HELP BJ'S

Higher sales of candy, cigarettes, housewares and small appliances lifted BJ's results. The company also saw a 4 percent increase in customer traffic, excluding gasoline sales.

BJ's and other warehouse clubs charge customers a membership fee to shop at their stores, which typically sell bulk packages of items like soda and toilet paper, as well as big screen televisions and other nonessential goods.

The company said profit rose to $26.1 million, or 49 cents a share, in the first quarter ended May 1 from $24.3 million, or 45 cents a share, a year earlier.

Analysts on average were expecting 43 cents a share.

BJ's also raised its full-year earnings forecast to a range of $2.58 to $2.68 a share. It previously had expected $2.54 to $2.64.

(Reporting by Brad Dorfman; Editing by Lisa Von Ahn)

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Comments (1)
So after laying off over 1000 workers last year and increasing prices because of inflation they are able to boast an increase in profits. These are the green shoots that will wither and die. I’m just waiting for another dip in gold and silver prices so I can keep buying.

May 19, 2010 8:24am EDT  --  Report as abuse
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