May 26, 2011- The Target Corp. released higher than expected first quarter 2011 profits Wednesday morning, due to the increased profitability in their credit card business offsetting sluggish stores sales. Many shoppers visited their stores but were very cautious in what they spent. Discretionary items such as apparel have not sold as well of late due to shoppers watching the high prices of gas, food and other more essential goods.
Like many other stores Target is adding fresh groceries into more of their stores and promoting more use of their credit cards. But both cut into the overall margins at the store. Groceries generally have much lower margins and the credit cards are offering an additional 5% discount therefore additionally reducing margins.
Target reported a $689 million profit or $0.99 per share in their first quarter that ended April 30. That was up from $.90 per share or $670 million for the same quarter a year ago. They earned about five cents more per share than what market analysts had predicted.
Sales were up to $15.5 billion representing nearly a 3% increase. Total revenue jumped 2.2% to $15.95 billion the retailer announced. The company credit cards sales have increase substantially for the store, with credit cards sales representing 7.6% of sales while the same quarter last year saw the figure at 4.9% indicating a much higher use of their cards.
Their credit card business profit jumped sharply by close to 75% to over $190 million, while the improving consumer’s finances cut bad debt expense from $197 million a year ago to just $12 million.