Updated from 9:03 a.m. EDT

The shortfall on Target's ( TGT) bottom line in the first quarter was "the direct result of softer than planned sales," the retailer's CFO said on a conference call Thursday. But the company also saw a rise in credit card expenses, which jumped 27.4% to $210 million year over year.

The biggest part of that increase was the company's provision for bad debt, which increased from $89 million in the year-ago quarter to $130 million in the just-completed quarter.

Target's earnings were virtually unchanged from a year ago, as a jump in operating expenses offset a 7.6% rise in revenue.

The retailer earned $349 million, or 38 cents a share, on revenue of $10.32 billion in its quarter ended May 3. In the year-ago quarter, Target earned $345 million, or 38 cents a share, on $9.60 billion in revenue.

Analysts were forecasting earnings of 39 cents and revenue of $10.43 billion in the latest quarter, according to Thomson First Call.

In addition to missing analysts' forecasts, the results didn't meet Target's own expectations, said Doug Scovanner, Target's chief financial officer, on a conference call. Target had not released its first quarter expectations, but Scovanner's comments echoed the company's warning in April that its results were coming in below plan.

Still, he added, "We are pleased with our first quarter performance."

Analysts are expecting Target to post profits of 42 cents a share in its second quarter. While that target is "clearly within reach," Scovanner warned that it was above the company's internal plan. However, Scovanner said analysts' expectations of yearly earnings of $2.03 a share are "in-line" with Target's projections.

The company's same-store sales fell 0.1% in the quarter from a year ago. Same-store store sales compare results at like outlets open for more than one year. The company''s overall sales increase was due in part to a growth in square footage of 8% year over year.

At the end of the quarter, Target had 1,494 stores spread among its Target, Mervyn's and Marshall Fields divisions, up 6% from a year earlier.

Target's gross profit margin, which represents the difference between what a company charges for its goods and what it pays for them, declined slightly as a percentage of retail sales in the quarter. Compared with the same period a year ago, gross margin was down just 4 basis points to 32.24% of retail sales, which excludes the company's credit card revenues.

While the company was able to keep its cost of goods in line, it lost ground on the rest of its expenses. Target's sales, general and administrative costs increased 9.4% to $2.33 billion. As a portion of overall revenue, such expenses rose 36 basis points to 22.53%.

Target, which has faced scrutiny in recent months over the health of its credit card operation, saw its net write-offs for both its proprietary cards and its Target Visa cards grow in the quarter as a portion of receivables. For the proprietary cards, write-offs rose to 8.2% of receivables, up from 7.3% in the year-ago quarter. Meanwhile, Target Visa card write-offs increased to 8.5%, from 2.2% a year ago.

The company attributed the increases to a seasoning of its portfolio, as well as higher-than-expected bankruptcy filings in April.

"Our credit quality remains very good," said Gerald Storch, the company's vice chairman, on the call. "Overall delinquencies and write offs are within in their anticipated ranges."

Company officials said they expected Target's net write-offs and provisions for bad debt to stabilize at around 8.5% to 9% of receivables.

Despite the increase in write-offs and the bad debt provision, Target's pretax profit from its credit card operations rose from $115 million last year to $151 million in the just-completed quarter. The company's gross receivables increased to $5.68 billion in the quarter from $4.25 billion.

Besides the credit card situation, another possible dark cloud on the horizon for the company was inventory. Target's inventory increased 8.3% in the quarter to $4.94 billion, outpacing the company's sales and square footage growth.

The growth in inventory could force markdowns in some seasonal categories, said Gregg Steinhafel, president of the Target stores division, on the call. But Target has managed inventory well, Steinhafel insisted.

"There is no fundamental markdown problem here," company officials said.