NEW YORK (AP) — Target Corp.’s third-quarter net income rose 22.6 percent, helped by strong improvements in its credit card business and expansion into food.
The cheap-chic retailer on Wednesday also projected a strong holiday, saying it expects an important sales measure to rise more sharply than it has in three years. Shares rose 96 cents to $54.50 in premarket trading.
Target posted net income of $535 million, or 74 cents per share, in the quarter ended Oct. 30. That compares with $436 million, or 58 cents per share in the year-ago period.
Revenue rose 2.2 percent to $15.61 billion.
Analysts surveyed by Thomson Reuters forecast earnings of 68 cents per share on revenue of $15.61 billion.
Within its credit card segment, profit increased to $130 million from $60 million a year ago, as bad debt expense declined 64 percent to $110 million from $301 million in same period last year.
At Target’s retail segment, revenue increased 3 percent to $15.2 billion, partly because of a 1.6 percent increase in revenue at stores open at least a year. The measure is considered a key indicator of a retailer’s health because it excludes the effects of stores that open or close during the year.
Target, based in Minneapolis, is counting on drawing more shoppers this holiday season with a 5 percent discount for people who pay with its store-branded credit and debit cards. The offer was launched Oct. 17.
The discounter is also counting on benefits from revamping its stores across all areas, from improved electronics displays to better lighting in its cosmetics area. The big draw, however, is an expanded section for fresh food at its general merchandise stores.
Target CEO Gregg Steinhafel said last week when the company reported October revenue that traffic was healthy in stores, but the company is seeing essentials such as food selling better than discretionary items. That’s a sign that consumers are still squeezed for cash or cautious about spending.
That translated to the average customer’s total purchase shrinking 0.5 percent, but more customers came into its stores, fueling a 2.1 percent increase in transactions. Selling price per item fell 3.3 percent.
Target’s results came a day after rival Wal-Mart Stores Inc. reported a 9.3 percent increase in third-quarter net income as the world’s largest retailer benefited from cost controls and a robust international business. Wal-Mart also raised its full-year profit outlook.
Wal-Mart’s improvements came despite weakness at its U.S. business. Total revenue at U.S. Walmart stores fell as fewer customers visited and spent less when they did. Revenue at stores open at least a year also fell for the sixth quarter in a row.