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Target Meets Views, Backs Forecast

The retailer continues to outshine its larger rival, Wal-Mart.
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Updated from 8:57 a.m. EDT

SAN FRANCISCO --

Target

(TGT) - Get Target Corporation Report

reported a 13% rise in second-quarter earnings and backed its guidance for the full year, showing little damage from economic pressures that have worried investors about a broad consumer slowdown.

For the quarter ended Aug. 4, the Minneapolis-based discount retailer earned $686 million, or 80 cents a share, up from $609 million, or 70 cents a share, a year earlier.

Revenue rose 9.5% to $14.62 billion from $13.35 billion in last year's quarter. Same-store sales, or sales at stores open at least a year, climbed 4.9%.

Analysts surveyed by Thomson Financial had an average estimate for earnings of 80 cents a share and revenue of $14.67 billion.

For the full year, Target expects that earnings of $3.60 a share "remains within the range of likely outcomes" for its profit. That's in line with the company's prior guidance and slightly below analysts' average estimate of $3.63.

Target's report comes a week after

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Wal-Mart

(WMT) - Get Walmart Inc. Report

lowered its earnings outlook and warned that its customers are feeling pinched by economic conditions. Target shares have dropped nearly 7% since that report as investors worry that it could take a hit.

Target, however, is viewed as more cushioned from macroeconomic woes because it has done a better job of attracting higher-income shoppers. As well, many of Wal-Mart's issues are seen as company-specific problems.

Target's home-furnishing sales, for one, have improved despite the slumping real estate market. Officials attributed the stronger showing to better product assortment after a couple of years of struggles.

Target said the back-to-school season started off slightly slow in July, but the company expects business to perform at or better than planned as it heads deeper into the season. Late Monday, Target reiterated its forecast for August same-store sales growth of 4% to 6%.

Credit Card Boost

During the second quarter, Target opened 42 new stores and a distribution center in the second quarter. Earnings before taxes and interest expenses from its credit card business leaped 34% to $163 million. A large part of that came from late fee charges, which grew 36% due to higher rates.

Chief Financial Officer Doug Scovanner said that more of Target's credit card purchases are happening outside of its stores than within them. About 30% of the charge activity occurs inside Target, but additional purchases are being driven by the company's rewards program.

One analyst raised concerns that the current credit climate might put a strain on consumers to meet their payments, but Scovanner expressed confidence in the continued health of the business.

Shares of Target were up 69 cents, or 1.2%, to $59.78 Tuesday afternoon.