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rose 9% in the third quarter, despite disappointing sales and a rising expense rate.

In its quarter ended Nov. 1, the retailer earned $302 million, or 33 cents a share. That was up from the year-ago period, when the company earned $277 million, or 30 cents a share. The company also warned that fourth-quarter sales may come in under Wall Street estimates.

Revenue at Target rose nearly 11% from the third quarter last year to $11.29 billion.

The company met Wall Street's earnings expectations but fell shy of its revenue projections. Analysts polled by Thomson First Call were expecting Target to earn 33 cents a share on sales of $11.32 billion. At the end of last quarter, Target did not give specific earnings guidance for the quarter, but had warned analysts that it wouldn't meet their estimate of 34 cents a share.

In recent trading, the company's shares were down 67 cents, or 1.7%, to $39.26.

The company's retail sales rose 10.7% in the quarter to $10.9 billion. Revenue from the company's credit card operations increased 11% to $344 million.

Poor sales and earnings performance from the company's Mervyn's and Marshall Field's chains helped mask a respectable result from its core namesake division.

At Mervyn's, overall sales fell 10.1% from the third quarter last year to $825 million in the quarter. On a same-store basis, which compares like results at outlets open for more than one year, sales fell 11.1%.

Overall sales at Marshall Field's dropped 6.3% in the third quarter to $634 million. Same-store sales at the chain slumped 4.9%.

The poor results come on top of an already disappointing year for both chains. In the year to date, overall sales at Mervyn's have fallen 8.1% from the same period last year. Overall sales at Marshall Field's have dropped 5.2%.

Those declines offset the relatively strong performance of the company's Target chain. Sales at Target stores jumped 13.9% in the quarter to $9.6 billion. On a same-store basis, sales increased 6.7%. For the entire company, same-store sales increased 4.3%.

The poor performance of Mervyn's and Marshall Field's also weighed on Target's bottom line. Pretax profits at Mervyn's fell 41.8% in the quarter to $31 million. At Marshall Field's, pretax profits dropped 54.7% to $15 million.

In contrast, the company's Target chain increased pretax profits 12.5% from the year-ago quarter to $604 million.

Target blamed the struggling department store chains for a rise in its expense rate in the quarter.

Target's operating expenses increased 14% from the third quarter last year, outpacing its overall sales growth. As a portion of sales, such expenses increased 71 basis points to 24.63%.

The company said that the declining sales at Mervyn's and Marshall Field's didn't allow it to keep up with its overall expense increase.

Target also saw continuing problems with its credit card operations in the quarter. Like other retailers, the company has been confronted with rising rates of bad debt and increasing write-offs at its financing division in recent quarters.

In the third quarter, past-due accounts comprised 4.2% of total receivables, up from 4% in the same period last year. While past-due accounts fell on its proprietary store cards, they rose sharply on its Target Visa card. Past-due accounts now comprise 3.8% of receivables among Visa cardholders, up from 3% in the year-ago period.

Meanwhile, the company set aside $132 million for bad debt in the third quarter, up 14% from last year. Target wrote off another $132 million in receivables, which was 47% greater than in the year-ago period.

Write-offs at the company's branded Visa cards, which have come to dominate its credit card operations, soared to 9.7% of average receivables, compared to 6.9% in the third quarter last year. Proprietary card write-offs edged up slightly to 8%, from the 7.9% rate in the year-ago period.

Target issued another warning on a conference call with analysts and investors on Thursday, saying that its fourth-quarter earnings will likely fall short of analysts' expectations. Wall Street had projected the company would earn 90 cents a share on $15.7 billion in revenue in the holiday quarter.

Company officials blamed the potential shortfall on the performance of its struggling Mervyn's and Marshall Field's chains.

"That's frustrating," said Fran Radano, a buy-side analyst at Gartmore Global Investments. "They're not seeing the cyclical turn in department stores that others are seeing."

Gartmore is long Target.