* Profit of 81 cents a share beats 77-cent Wall St view
* Sees holiday-quarter profit of $1.45 to $1.55 per share
* Target cards used to pay for 14 percent of sales in last
* Sees same-store sales up 2-3 pct in holiday quarter
* Shares up 2 percent
By Phil Wahba
Nov 15 Target Corp on Thursday said it
expects more shoppers this holiday season to adopt its store
credit and debit cards, a key tool that draws customers to the
discount chain's stores and helped it report a bigger than
expected third-quarter profit.
Target said 14 percent of sales during the third quarter
were paid for with its debit and credit cards, compared with 9.5
percent a year earlier. The cards offer a 5 percent discount to
foster customer loyalty.
"The RedCard is really a way to differentiate themselves and
a way to push growth," said Edward Jones analyst Brian
The retailer forecasts that the percentage of sales made
through the card would again increase this quarter, by 4 points
compared to a year earlier, and sees more room left for growth.
A Target executive pointed to the Kansas City where the RedCards
were first introduced and said they accounted for 20 percent of
Target expects same-store sales to be up 2 to 3 percent this
holiday quarter despite what one executive said would be a
"highly competitive and promotional" Christmas period.
Target has tweaked its strategy to try to increase its
market share during the holiday season. It is offering to match
certain online retailers' prices and will open its stores at 9
p.m. on Thanksgiving Day, rather than staying closed for that
The company has been opening smaller city stores and is set
to open its first Canadian stores in 2013. It will also sell a
line of holiday goods with upscale department store Neiman
Marcus Group Inc in December.
Target Chief Executive Gregg Steinhafel told analysts that
the number of visits by shoppers to the CityTarget stores, which
attract a younger crowd, has been strong.
Target said it had earned $637 million, or 96 cents per
share, in the third quarter ended on Oct. 27, up from $555
million, or 82 cents per share, a year earlier.
Excluding a gain from the pending sale of its credit card
receivables, the profit was 81 cents per share, 4 cents more
than what Wall Street analysts were expecting, according to
Thomson Reuters I/B/E/S.
Adding more food, particularly perishables, and offering the
5-percent card discounts weighed on profitability; gross margin
during the quarter slipped 0.2 points to 30.3 percent of sales.
But Edward Jones' Yarborough said Target had managed costs to
minimize the impact.
The company said it expected to earn between $1.45 and $1.55
per share in the holiday quarter, including expenses linked to
its entry into Canada next year. That compares with analysts'
forecasts of $1.51.
Target previously said third-quarter sales had increased 3.4
percent to $16.60 billion. Sales at stores open at least a year
were up 2.9 percent, helped by higher prices and customers'
buying more items per transaction.
Shares of Target were up $1, or 1.6 percent, at $61.38 in
late morning trading on the New York Stock Exchange.