Target Bottom Line Up 2.7 Percent in First Quarter
MINNEAPOLIS-A sterling performance from its credit-card segment and expense controls pushed Target's first-quarter net income to $689 million, 2.7 percent ahead of the bottom line from the first quarter of last year.
Although revenues from the credit-card segment fell 18 percent, Target slashed credit-card expenses by 69 percent in the quarter, which ended on April 30, and which brought a 75 percent improvement in this sector's profit. The retailer's selling, general and administrative expenses increased 2.9 percent in the quarter and gained just 10 basis points as a percentage of net sales, to 20.8 percent. These factors offset a 90-basis point drop in gross margin to 30.4 percent--which was attributable to Target's PFresh remodel program and its 5 percent REDcard Rewards initiative.
Net sales increased 2.8 percent in the quarter to $15.6 billion, including a 2 percent pickup in same-store sales.
Gregg Steinhafel, Target's chairman, president and CEO, said sales were weaker than anticipated, but added that both the PFresh remodels and the REDcard Rewards initiative "continue to deliver incremental traffic and sales in an environment where our guests remain cautious in their spending."