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Target Earnings Surpass Estimates on Credit, Clothing

Target Earnings Surpass Estimates
Target earnings surpass estimates as shoppers are returning to stores. Photographer: Craig Lassig/Bloomberg

May 19 (Bloomberg) -- Target Corp., the second-largest U.S. discount retailer, posted first-quarter earnings that beat analysts’ projections, helped by clothing sales and profit at its credit-card unit.

The outlook for Target’s retail and credit-card divisions makes earning 91 cents a share in the current quarter and $3.81 for the full year “reasonable,” Chief Financial Officer Douglas Scovanner said during a conference call today.

Shoppers are returning to stores as the U.S. economy rebounds, with consumer spending projected to climb 3 percent this quarter, according to the median estimate of economists surveyed by Bloomberg. Chief Executive Officer Gregg Steinhafel cited a better-than-expected economic environment that boosted sales of profitable items such as clothes.

Net income rose 29 percent to $671 million, or 90 cents a share, from $522 million, or 69 cents, a year earlier, the company said today in a statement. Credit-card profit more than doubled to $111 million from $39 million, exceeding expectations, helped by reduced bad-debt expense, Steinhafel said.

Revenue, including proceeds from stores and the credit-card division, increased 5.1 percent to $15.6 billion.

Wal-Mart Profit

Seventeen analysts projected first-quarter profit of 87 cents a share, the average of estimates Bloomberg compiled. The retailer said May 6 that first-quarter profit would probably “meet or exceed” the average Wall Street estimate.

Wal-Mart Stores Inc., the world’s largest retailer, yesterday said first-quarter profit rose 10 percent, to $3.32 billion, on international sales. Sales at U.S. stores open at least a year dropped 1.4 percent.

Target has only U.S. stores and has said it may open international stores no earlier than 2013. Expanding grocery sections and adding smaller-format stores are priorities in the meantime, Steinhafel said during the call.

Same-store sales rose 2.8 percent in the first quarter, Target said.

Target fell 19 cents to $54.03 at 4 p.m. in New York Stock Exchange composite trading. The shares have gained 12 percent this year. Wal-Mart slid 67 cents to $53.04, while the Standard & Poor’s 500 Retailing Index fell 0.5 percent.

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

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net

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