Target (TGT) - Get Report fans are crossing their fingers that the big retailer can find the range again this winter.

Thursday brought the latest in a string of quarterly disappointments at the Minneapolis-based discounter. Second-quarter numbers showed that growth is softening and credit losses are mounting. Meanwhile, the company's old-line department store business, almost an afterthought in the big-box retailing age, is looking more and more like an albatross. Target expects another setback in the third quarter, though it insists the stage will then be set for a quick turnaround.

"We're expecting modest

earnings-per-share growth in the third quarter, with the potential for a sharp increase in the fourth quarter," said Doug Scovanner, Target's chief financial officer, on a conference call with analysts and investors.

Still, the company didn't spell out precisely how it would go about solving its problems. And considering that last year's fourth quarter was when Target's troubles started, investors can be forgiven for taking a wait-and-see attitude toward the company's revival schedule. On Thursday, Target shares slid $1.65, or 4.1%, to $38.29.

Struggling

In its just-completed second quarter, Target earned $358 million, or 39 cents a share, on $10.98 billion in revenue. While revenue rose nearly 9% from last year, earnings climbed by just a penny a share.

Analysts surveyed by Thomson First Call were expecting earnings of 40 cents a share on $11 billion in revenue. Just last month, Target projected that it would earn between 39 cents and 40 cents a share.

As in previous quarters, faltering sales at the Mervyn's and Marshall Field's divisions, increasing credit card write-offs and rising operating expenses all weighed on Target's performance.

While revenue was a mixed bag for Target, the company lost ground on its expense structure. Its gross profit margin, for instance, declined by 26 basis points as markdowns increased. Gross margin represents the spread between what a retailer charges consumers for its products and what it pays suppliers for them.

Credit card revenue jumped 23%, but write-offs zoomed 87% higher and the provision for bad debt leaped 27%. All told, pretax profits at the credit card unit rose 24% to $160 million.

Write-offs at the company's Target Visa card jumped to 9.3% of receivables from 4.8% in the year-ago period, while they increased to 8% from 7.5% of the company's proprietary card receivables. But Target officials said they expected those rates to stabilize.

Results from Mervyn's and Marshall Fields helped to hold down revenue growth. Sales at Target stores jumped 11.3% to $9.5 billion. But sales fell 7.3% to $821 million at Mervyn's and dropped 3.4% to $569 million at Marshall Field's.

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For the two department store chains, poor sales trends should continue into the third quarter but will likely turn around in the fourth quarter, Target said. While the company is working on a number of initiatives to turn around business at both chains, officials gave few details on the call. And they acknowledged that any fourth-quarter turnaround at Mervyn's or Marshall Field's will likely be due more to easy comparisons with last year than to any new marketing effort or fundamental change in their business.

Problems

Though the Target-brand stores continue to perform well, the issues at Mervyn's and Marshall Fields continue to afflict the company as a whole.

Target warned that third-quarter earnings won't meet analysts' estimates of 34 cents, up from 30 last year. But citing an expected fourth-quarter upswing, Target officials said they are "comfortable" with Wall Street's full-year earnings forecast of $2.01 a share.

Investors may not be as comfortable with that target. If the economy improves, Target could indeed post substantial sales increases in the fourth quarter, especially compared to last year's subpar effort, said Scott Rothbort, president of Lakeview Asset Management and a contributor to

Street Insight

. But the company faces a number of potential problems, said Rothbort, who has no position in Target.

The discount chain hasn't yet demonstrated that it knows how to turn around operations at Mervyn's or Marshall Field's, he said. Meanwhile, the company faces some big challenges in California, one of its key markets, including increased worker's compensation costs and a challenge from

Kohl's

(KSS) - Get Report

, which recently started opening stores in the state.

It's worth noting that last year's fourth quarter brought the first signs of Target's woes. Sales fell about $300 million below plan as the namesake discount stores division posted a drop in same-store sales for the first time in history. Can Target do better this time?

"We'll have to wait to see how the fourth quarter will do, because that's what we're really relying on," said Rothbort. "It's just a fourth-quarter story."