Target Quarter Swollen by Gain

The company also recently introduced a new custom clothing concept called "Target to a T" on its Web site, Target.com. Customers can special order apparel on-line to fit their sizes and color preferences. Later this month, Target.com will also implement a custom mailing to customers, based on their previous selections.

Meanwhile, at its Super Target stores, the company plans to increase the number of Shop Keeping Units (SKU) of its proprietary brand grocery items by 50%, and Target will also boost its wine offering to double the number of stores it is in now.

Looking to the balance of the year, "momentum remains strong," the company said on the call. While Target backed analysts' third-quarter earnings estimate for 37 cents a share, it noted that the estimate does not include the gain of 18 cents a share the company expects to record from the sale of Mervyn's.

Marshall Field's is also still expected to be roughly 3 cents-a-share accretive to third-quarter earnings, while 2 cents-a-share dilutive in the fourth quarter. Meanwhile, Mervyn's is expected to be dilutive to the fourth quarter by 4 cents to 5 cents a share and marginally dilutive in the third quarter. In the fourth quarter, however, the share repurchase program should be mildly accretive.

Same-store sales in the third quarter expected up 2% to 4%. Target reiterated its August plan for flat to positive 2% same-store sales but said results in September and October combined are expected to be better than August's results.