Target Hits the Spot as Profit Jumps, Easily Beats Street

Strong holiday sales and cost controls helped Target Corp. (TGT) post a 54% jump in fourth-quarter earnings, easily surpassing Wall Street's expectations. The nation's second biggest discount retailer after Wal-Mart Stores (WMT) announced results Tuesday.

For the three months ended Jan. 30, Minneapolis-based Target reported net income of $936 million, or $1.24 a share, up from $609 million, or 81 cents, in last year's fourth quarter. Analysts, on average, forecast earnings of $1.16 a share, according to Thomson Reuters.Revenue rose 3% to $20.18 billion from $19.56 billion a year ago, slightly ahead analysts' view for $20.15 billion. Same-store sales, a key industry measure tracking sales at stores open more than a year, ticked up 0.6%, the company said. Revenue from Target's credit card portfolio dropped 14% to $462 million, but that was more than offset by a 37% decline in credit card expenses.

"Fourth-quarter retail segment performance was well above our expectations due to stronger-than-expected holiday sales, combined with well-controlled inventories and disciplined expense controls," CEO Gregg Steinhafel said in a statement.

Target hasn't held up as well as rival Wal-Mart through the recession because of its greater dependence on consumers making discretionary purchases. More than 40% of Target's annual sales come from apparel, accessories, home furnishings and decor, whereas Wal-Mart generates just 16% of annual revenue from those categories.

"In 2010, we expect our guest traffic trends and sales of discretionary categories to benefit from broader implementation of our new merchandise initiatives as well as a continued modest recovery in the economy, and believe Target will continue to gain profitable market share," Steinhafel said.

For the full fiscal year, Target said profit grew 12% to $2.49 billion, or $3.30 a share, from $2.21 billion, or $2.86. Revenue rose fractionally to $65.36 billion from $64.95 billion. Additionally, Target resumed its stock repurchase program in January, buying back about 8.3 million shares for $423 million.
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