Target Profit Rises 18%, Helped by Credit Card Business

Targetsaid its quarterly profit rose almost 18%, boosted by its credit card business and strong sales at established stores, sending its shares higher.

The No. 2 U.S. discount chain, behind Wal-Mart Stores, said profit rose to $651 million, or 75 cents a share, in its fiscal first quarter, ended May 5, from $554 million, or 63 cents a share, in the same period a year earlier.

Analysts, on average, were expecting 71 cents a share, according to Reuters Estimates.

In recent quarters, Target's sales gains at stores open at least a year have outpaced those of Wal-Mart, boosted by its trendy but inexpensive designer merchandise, like its Isaac Mizrahi home decor and clothing.

It is also increasing its selection of food to bring shoppers to its stores more often.

"Target is reaping the benefits of its own infrastructure -- supply chain, sourcing -- and the part that's more art than science -- the merchandising," said Sarah Henry, a consumer analyst with MFC Global Investment Management, of the retailer's stronger-than-expected results.

Jae C. Hong

Revenue Rising

Target's first-quarter revenue rose 9.2% to $14.04 billion. Sales at stores open more than a year -- a key retail gauge known as same-store sales -- increased 4.3%.

Credit card revenue rose to $418 million from $370 million. Target offers a Target Visa and another card that can be used only at its stores.

Last week, Wal-Mart reported an 8.1% rise in first-quarter profit but forecast second-quarter earnings that could fall short of Wall Street targets as it cuts prices to clear out spring clothing.

Wal-Mart's first-quarter U.S. same-store sales rose 0.6%, excluding the impact of fuel.

"Target is able to pair up high-turning consumables with higher-margin general merchandise," Henry said, "Wal-Mart has not been as successful with making that happen."

U.S. retailers' results are being watched closely after they reported the weakest April sales on record, blaming bad weather and an earlier Easter holiday.

With the national price for regular unleaded gasoline hitting a record $3.22 a gallon this week, investors are watching to see if May results can rebound.

Earlier this month, Target forecast May same-stores sales to rise between 5% and 7%, and on Monday it backed that view.

Target will report same-store sales for the four weeks ended June 2 on June 7.