Target eported quarterly earnings on Thursday that surpassed nalysts' expectations as the discount chain lured shoppers with a wider variety of food products and 5-percent discounts for its cardholders.
Following the announcement, the retailer's shares rose 1 percent in early trading. (Get real-time quotes for Target here.)
Target said it had earned $637 million, or 96 cents per share, in the third quarter, up from $555 million, or 82 cents a share, a year earlier.
Its adjusted earnings rose to 90 cents from 86 cents in year-ago quarter.
Revenue, which includes revenue from its credit card business, increased 3.2 percent to $16.93 billion from $16.40 billion a year ago. Sales at stores open at least a year were up 2.9 percent. That came largely from higher prices and customers' buying more items per transaction.
Analysts had been expecting earnings excluding items of 77 cents per share and $16.92 billion in revenue, according to Thomson Reuters estimates.
The company said it expected to earn between $1.45 and $1.55 a share in the holiday quarter, including expenses linked to its entry into Canada next year. That compares with analysts' forecasts of $1.51.
Adding more food to the stores and offering a 5-percent discount to cardholders has attracted shoppers but also weighed on profit rates. Gross margin during the quarter slipped 0.2 points to 30.3 percent of sales.
Target said 14 percent of sales during the quarter were paid for with its debit and credit cards, compared with 9.5 percent a year earlier.
The company has been opening smaller city stores and is set to open its first Canadian stores in 2013. It will also sell a line of holiday goods with upscale department store Neiman Marcus Group in December.
CORRECTION: An earlier version of this article said Target's revenue increased 3.4 percent to $16.6 billion and missed estimates. In fact, the company's revenue rose 3.2 percent to $16.93 billion and matched expectations.