Target Corp. (NYSE: TGT) said first-quarter profit surpassed Wall Street�s estimate, citing a better-than-expected economic outlook, strong clothing sales, and increased interest income from its store credit card.
In line with other chains, the second-largest U.S. discount retailer witnessed increased traffic and sales, as consumers gained confidence that the global recession is lifting and bought more clothes and began charging purchases again.
�Clearly, the economy and consumer sentiment have improved since the weakest point in 2009, but we believe that both are still somewhat unstable and fragile and will likely continue to experience occasional setbacks as the year progresses,� while unemployment rates remain high, chairman and CEO Gregg Steinhafel said in a conference call.
Steinhafel said the retail segment saw consumers spend more money on higher-margin clothing and home d�cor, lifting overall margins across major U.S. retailers, including Target which saw its gross profit margin increase to 31.3% for the quarter, an increase from 30.8% for the second quarter of fiscal 2009.
Revenue rose 5.1% year-to-year to $15.6 billion for the quarter. Analysts surveyed by Bloomberg expect a 3% rise in revenue for the current quarter.
The Minneapolis, Minn.-based retailer said net income increased 29% to $671 million, or 90 cents per share, compared with $522 million, or 69 cents per share, for the equivalent quarter last year.
Same-store (stores open at least one year) sales increased 2.8% during the quarter contrasted with rival Wal-Mart�s earnings report released Tuesday, which revealed same-store sales dropping 1.4% year-to-year. Wal-Mart cites some of the cause for the drop comes from wealthier customers going back to higher-end retail chains, such as Target.
Analysts polled by Bloomberg expected first-quarter earnings to reach 87 cents per share. Earlier in the month, Target said earnings would most likely �meet or exceed� the Street�s expectations.
Unlike Wal-Mart, with 25% of its sales derived from stores outside of the U.S., Target has no international sales. Target said it intends to open stores overseas in 2013, at the earliest.
Until then, Target�s priorities include opening smaller stores and rolling out larger grocery sections, said Steinhafel.
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