Target’s Profit Up 27% on Strong Sales

Target Corp. on Thursday reported a 27% jump in second-quarter earnings, powered by strong sales and profit growth at its namesake stores as consumers sought bargains in the slumping economy.

Separately, Kohl’s Corp. posted a 44% rise in second-quarter profit as the value-priced retailer expanded and consumers looked for discounts.

Target, whose chains also include Mervyn’s and Marshall Fields, beat Wall Street expectations by a penny a share, with earnings of $344 million, or 38 cents, for the quarter ended Aug. 3. That compared with $271 million, or 30 cents, a year ago.

The Minneapolis-based company reiterated its third-and fourth-quarter profit goals, but said during its conference call that if the recent weak sales trend continues, its third-quarter projection could “be at risk.”

The retailer, whose Target stores are known for carrying trendy yet inexpensive clothing and housewares, said its unique products and “intense focus on inventory management” helped it to deliver such a strong quarter.

Target’s revenue rose 13% to $10.07 billion, driven by a 16% increase in the Target division. Revenue from its Target credit card arm surged 89% to $277 million. The company has been upgrading holders of its private credit card to a Target Visa card that can be used at other retailers.

Sales at stores open at least one year rose 4.4% at Target Stores, but fell 5.1% at Mervyn’s and 2.5% at Marshall Field’s. Total same-store sales were up 3%.

Target said that given a reasonable sales performance, it should meet Wall Street’s estimate of 31 cents a share for the third quarter, but said that if the “softer sales trends” continue, the results could turn out to be a penny or two short.

The company expects to meet analysts’ projection of 77 cents for the fourth quarter.

Target’s earnings report comes a week after it reported same-store sales that were below plan for July. July is normally a transitional month before back-to-school selling heats up, so sales in the coming months will be more meaningful for Target.

Kohl’s posted net income of $124.4 million, or 36 cents a share, for the quarter ended Aug. 3, up from $86.5 million, or 25 cents, a year ago. Analysts on average were expecting 34 cents, according to Thomson First Call. Sales jumped 27% to $1.9 billion, while same-store sales climbed 10.6%.

The 420-store chain has been luring customers fromdiscounters and traditional department stores by offering brand-name items, including Dockers, Levi’s and Osh Kosh, at discount prices.

Kohl’s plans to open 33 more stores this year, mostly in the Midwest. It plans to enter the Los Angeles market next year.

On the New York Stock Exchange, Target rose $2.21, or 7%, to $34.38, while Menomonee, Wis.-based Kohl’s rose $2.91, or 4%, to $71.66.