Profits exceed estimates at Target
MINNEAPOLIS — Profits at Target grew 10.2% to 82 cents in the third quarter, compared with 74 cents the prior year, thanks to healthy sales growth and ongoing improvement in the company’s credit card business.
It was an impressive performance, as the company had forecast earnings per share would fall in a range of 70 cents to 75 cents, and analysts’ consensus estimate was 74 cents. The underlying strength of the quarter is more impressive if one-time tax gains from the prior year and expenses related to the start-up of operations in Canada are removed from the equation. Target’s third quarter 2010 results were aided by a 6 cents per share tax benefit, while this year’s third-quarter results were negatively affected by expenses of 5 cents per share from cost related to the Canadian market entry where the retailers first stores aren’t due to open until 2013. Excluding these variables, adjusted earnings per share increased 28% to 87 cents, compared with 68 cents.
Target chairman, president and CEO Gregg Steinhafel said the company was very pleased with results that reflect strong performance of its U.S. retail and credit card businesses and that it has the right strategy and team in place to drive results.
Sales at the company stores increased 5.4% to $16.1 billion, compared with $15.2 billion the prior year, and same-store sales grew at 4.3%. The top-line growth translated to operating profits for the division that increased 14.1% to $931 million compared with $816 million. The company also reported that its gross margin rate declined to 30.5% from 30.6%, but expenses declined more significantly, dropping to 21.4% from 21.8%.
The company’s credit card segment also contributed to profits. Although the volume of receivables declined 9.9% to an average of $6.2 billion, the credit quality of the individuals who owe that debt is better, which means Target’s bad debt expenses declined to $40 million in the third quarter, compared with $110 million the prior year. As a result, the credit card segment’s operating profit increased 10% to $143 million, compared with $130 million.
American Express launches Target prepaid card
NEW YORK — American Express has announced the launch of the American Express for Target card, a reloadable prepaid card with no monthly or maintenance fees, available exclusively at more than 1,000 U.S. Target stores.
“We’re excited to partner with Target to provide consumers with a safe and secure everyday payment tool. This prepaid reloadable card is loaded with benefits synonymous with American Express such as roadside assistance, purchase protection, and global assist,” said Stefan Happ, SVP and general manager of American Express’ global payment options. “In addition, it delivers premium value to consumers, with no fees for monthly usage, balance inquiries, alerts or card replacement.”
The card is available at participating Target stores and funds can be loaded at the register using multiple loading options with the ability to reload in-store, online or by phone, according to American Express.
The card is an initial $3 load fee and costs and additional $3 for each subsequent in-store reload at participating Target stores. The first ATM withdrawal per month is free, while the rest are subject to a $3 fee (a separate ATM fee by the ATM owner may apply). There is no fee for monthly usage, balance inquiries, alerts or card replacement, American Express said, and funds do not expire.
Report: Fresh & Easy chief marketing officer exits
EL SEGUNDO, Calif. — Fresh & Easy’s chief marketing officer reportedly has left the retailer, according to published reports.
Simon Uwins’ exit, according to media outlets, was prompted by his desire "to pursue other interests."
The announcement was followed by a statement that the company currently is hiring more than 600 employees for the chain’s more than 20 stores set to open early next year in California and Nevada. The company also recently launched its test run of a loyalty card program.
Fresh & Easy, which a U.S. subsidiary of Tesco, operates stores across Arizona, California and Nevada.