Target profit up, cautious on rest of year
NEW YORK (Reuters) - Target Corp (TGT.N) said on Tuesday its quarterly profit rose almost 13 percent, meeting Wall Street targets, but the retailer is planning more conservatively for the rest of the year because of the "more difficult economic environment" facing its shoppers.
Target, the second-largest U.S. discount chain behind Wal-Mart Stores Inc (WMT.N), said earnings rose to $686 million, or 80 cents per share, in its second quarter ended August 4 from $609 million, or 70 cents per share, a year earlier.
Analysts, on average, had been expecting it to earn 80 cents per share, according to Reuters Estimates.
Retail stocks have been pressured in recent weeks as investors fret that the deteriorating housing market, rising U.S. mortgage defaults and higher gas and food prices are curbing consumer spending.
Wal-Mart reported a lower-than-expected quarterly profit and cut its full-year earnings forecast last week, saying "economic pressures" such as higher fuel prices have depleted shoppers' wallets.
But Target's sales at existing stores have outpaced those at Wal-Mart as its sales of cheap but trendy clothing and home decor by designers such as Isaac Mizrahi have helped to offset sales of lower-margin goods such as groceries. Wal-Mart is struggling in its clothing and home businesses.
"Target is showing very strong execution," said Craig Johnson, president of retail consulting firm Customer Growth Partners, adding that Target tends to cater to higher-income shoppers who are better able to weather economic bumps than Wal-Mart customers.
But Target's customers are not immune to woes and the retailer is factoring in the more difficult environment as it heads toward the holiday season.
"As we look to the remainder of the year, we are planning our business more conservatively," said President Gregg Steinhafel on a call with analysts.
SALES RISING
Target said total quarterly revenue rose to $14.62 billion from $13.35 billion a year ago, while comparable-store sales -- a key retail gauge that measures sales at stores open longer than one year -- increased 4.9 percent.
The retailer said the back-to-school season, a critical shopping period for U.S. retailers that typically begins in July, got off to a slower-than-expected start.
But as the season has progressed, Target said business is performing at or better than planned, helping to recapture some of July's shortfall.
The company on Monday reaffirmed its August comparable- store sales forecast of 4 percent to 6 percent growth. Target gave its sales estimate earlier this month and is schedule to report final August sales on September 6.
For the quarter, credit-card revenue rose to $453 million from $388 million a year ago. Target offers a Target Visa and another card that can be used only at its stores. Continued...
