May 20 (Bloomberg) -- Target Corp., the second-largest U.S. discount retailer, said first-quarter profit declined less than analysts estimated after it limited markdowns and controlled expenses.

Net income fell 13 percent to $522 million, or 69 cents a share, Target said today in a statement. That beat the 60-cent average of estimates compiled by Bloomberg. The retailer said May 7 quarterly profit was “well above” a consensus of 52 cents at that time.

Target reduced inventory and labor costs in the quarter to counter the decline in U.S. consumer spending that has hit most of the retail industry. Chief Executive Officer Gregg Steinhafel said today on a conference call that he sees a “more normalized environment” as companies reduce their previous inventory glut and offer smaller discounts.

“This company’s done a very good job of becoming more nimble and flexible with regard to expenses,” said Matt Arnold, an analyst at Edward Jones & Co. He is based Des Peres, Missouri, and recommends buying the shares. “We know that when discretionary spending does come back, that Target’s going to be a beneficiary of it in light of how good they are in catering to what consumer preferences are.”

The shift of some marketing and advertising expenses from the first quarter to later this year also helped profit. Selling, general and administrative expenses fell to 21 percent of sales from 21.2 percent a year earlier

Target rose $1, or 2.4 percent, to $42.94 at 4 p.m. in New York Stock Exchange composite trading. The stock has advanced 24 percent this year.

‘Seem Achievable’

The stock pared gains after Target said it will “remain challenging” to meet or exceed analysts’ second-quarter consensus estimate of 63 cents a share and the $1.46 analysts predict for the second half of the year. At this point, those projections “seem achievable,” Chief Financial Officer Douglas Scovanner said on a conference call.

Target reported the results ahead of its annual meeting next week, during which shareholders will decide whether to elect hedge-fund manager William Ackman and four other dissident board candidates. Ackman, who heads Pershing Square Capital Management LP, argues that Target has underperformed larger Wal- Mart Stores Inc. during the recession.

Total revenue, including credit-card income, was little changed at $14.8 billion in the quarter. Sales at stores open at least a year, considered a key gauge of performance because they exclude recently opened or closed locations, fell 3.7 percent.

Target said earlier this month it was able to keep prices at a more favorable level in the quarter. The retailer also probably paid less for its merchandise as worldwide demand waned, said Sarah Henry, a retail analyst with MFC Global Investment Management in Berwyn, Pennsylvania. The firm has $1 billion in assets, including Target shares.

Net income in the year-earlier period was $602 million, or 74 cents a share.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

Last Updated: May 20, 2009 16:21 EDT