Target
Corp's first-quarter profit declined 12% to $522 million, or 69 cents a share,
from $602 million, or 74 cents a share. But results were well ahead of
Wall Street's consensus estimate of 60 cents due to limited markdowns and
controlled expenses.
Sales
increased 0.4% in the first quarter to $14.4 billion in 2009 from $14.3 billion
in 2008, due to the contribution from new store expansion partially offset by a
3.7% decline in comparable-store sales. Retail segment earnings before interest
expense and income taxes (EBIT) were $962 million in the first quarter of 2009,
a 0.3% increase from $959 million in 2008.
“Our
first quarter earnings per share reflect disciplined execution of our strategy
in a difficult environment,” said Gregg Steinhafel, chairman, president and
chief executive officer. “In our retail segment, we continue to experience
strong positive comparable store sales results in our traffic-driving food and
commodity categories, and the profitability of our first quarter sales was
higher than expected due to outstanding gross margin and expense rate
performance. Credit card segment results for the first quarter were stable,
profitable and consistent with our expectations. Very importantly, we believe
this improved stability and predictability in key aspects of both our retail
and credit card segments reflects the resilience of our strategy and
underscores our ability to generate substantial value for our shareholders over
time.”
First quarter
gross margin rate was unchanged from prior year, due to favorable markup and
markdown performance offset by the unfavorable mix impact of faster sales
growth in non-discretionary lower margin rate categories. First quarter
selling, general and administrative (SG&A) expense rate improved compared
with the first quarter of 2008, benefiting from well-controlled dollar growth
in a continued soft sales environment and timing of recognition of certain
expenses.
Average
credit card receivables in the quarter increased $249 million, or 3.0%, from
the first quarter of 2008, and quarter-end receivables increased $37 million,
or 0.4%, from the same period a year ago.
Credit
card segment profit in the quarter declined to $39 million from $181 million
last year as a result of a decline in the spread to LIBOR earned on the overall
portfolio, and as a result of other factors, including a 49% reduction in
Targets investment in this segments average receivables.
As
expected, net write-offs in the quarter were $301 million. The allowance for
doubtful accounts was $1,005 million at quarter-end, reflecting a $5 million
reduction during the period.
Net
interest expense for the quarter increased $1 million from first quarter 2008
to $202 million, reflecting higher average debt balances offset by a lower
average portfolio interest rate.
The
companys effective income tax rate for the first quarter was 36.7% in 2009,
down from 37.1% in 2008, primarily due to a higher proportion of earnings that
are not subject to tax and a decrease in the amount of reserves recorded for
tax uncertainties. For the full year, the company now expects an effective
income tax rate in the range of 37.0 to 38.0%.
