Wall Street Journal
By Andria Cheng
Target Corp.'s first-quarter profit rose 2.7% as the retailer saw a steep drop in expenses for bad debt in its credit-card business. That improvement helped offset weaker profits from retail sales.
Profit in the credit-card segment profit jumped to $194 million from $111 million, as expenses for bad debts plunged to $12 million from $197 million. That improvement came despite an 18% decline in credit-card revenue, to $355 million.
Target's comparable-store sales rose 2% for the April quarter. The retailer has added fresh food products and remodeled other store segments in a program called PFresh, and has introduced a 5% discount offer for its Target card users to drive "incremental traffic and sales in an environment where our guests remain cautious in their spending."
Net income in the quarter ended April 30 rose to $689 million, or 99 cents a share, from $671 million, or 90 cents, a year earlier. Sales rose 2.8% to $15.58 billion.
At Target's retail unit, segment profit before interest and tax fell 4.2% to $1.06 billion in the latest quarter. Gross margin narrowed to 30.4% from 31.1%, hurt by PFresh and the 5% discount offer.
Selling, general and administrative expenses fell to 20.4% of sales from 20.6%, Target's results showed.
Higher gasoline prices and food costs have hurt shoppers' ability to spend, and consumers have been seeking to consolidate trips to the store via one-stop shopping, retailers have said. The industry's also battling inflationary cost pressures for apparel, with analysts saying discounters would have little leeway to pass on any cost increase to their budget-conscious shoppers.
