Target Corp. (TGT), the second-largest U.S. discount retailer, posted a 2.7 percent gain in first-quarter profit that beat analysts’ projections, bolstered by the credit-card business.
Net income in the period ended April 30 rose to $689 million, or 99 cents a share, the Minneapolis-based company said today in a statement. That compared with the 94-cent average of estimates compiled by Bloomberg.
The credit-card business performed better than expected, helping to counter slower-than-anticipated sales in retail, Chief Executive Officer Gregg Steinhafel said in the statement. Sales also benefited from the appeal of Target’s REDcard rewards program and its PFresh grocery sections.
“PFresh continues to gain traction,” Barclays Plc analyst Robert Drbul said in a May 16 note. “The PFresh initiative at Target is one of the largest transformational programs under way."
Total revenue climbed 2.2 percent to $15.9 billion. A year earlier, first-quarter profit was $671 million, or 90 cents a share.
Target gained 47 cents to $51.25 in early trading after closing at $50.78 yesterday on the New York Stock Exchange. The shares had dropped 16 percent this year through yesterday compared with a 3 percent gain for Wal-Mart Stores Inc. (WMT), the world’s largest retailer.
Wal-Mart, based in Bentonville, Arkansas, said yesterday that sales at U.S. stores open at least a year dropped for an eighth straight quarter. Customers are making fewer trips to stores because of the increase in fuel prices, U.S. stores chief Bill Simon said.
Target is vying with dollar stores, as well as Wal-Mart, for cash-strapped customers. Confidence sank to a six-week low last week, again because of escalating fuel costs, according to the Bloomberg Consumer Comfort Index.
The U.S. economy grew at a 1.8 percent annual rate in the first quarter, short of analysts’ projections, after a 3.1 percent gain in the final quarter of 2010.
Steinhafel is looking beyond Target’s home turf to spur sales growth, with plans to open 100 to 150 sites in Canada in 2013 and 2014. The expansion, the retailer’s first outside the U.S., may eventually help push sales past $100 billion, Target said in February. Wal-Mart entered Canada in 1994 and has more than 300 stores there.
(Target will hold a call on the results at 10:30 a.m. New York time. To listen, see www.target.com/investors.com.)
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