Discount-store operator Target Corp. (TGT) on Wednesday reported a profit for the first quarter that beat analysts' expectations, as strong same-store sales growth and higher revenue at its retail segment helped offset lower earnings at its credit card segment.
Buoyed by the results, Target forecasts earnings for the second quarter above analysts' estimates and raised its earnings outlook for fiscal 2012.
Target's retail sales for the quarter were aided by unusually warm weather and an early Easter. Sales at the company's U.S. retail segment grew 6.1 percent from the year-ago period to $16.54 billion, reflecting a 5.3 percent increase in comparable-store sales and the contribution from new stores.
Comparable-store sales or comps is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year.
However, the credit card segment's profit for the quarter declined to $139 million from $194 million in the same period last year. Credit card segment revenues dropped 7.1 percent from last year to $330 million.
Reflecting start-up expenses, depreciation and amortization related to expected market entry in 2013, the Canadian segment's earnings before interest expense and income taxes or EBIT was a negative $55 million.
Target opened its first temporary store in Canada in the fourth quarter of fiscal 2011. The company plans an official launch of its 135 Target stores across Canada in early 2013.
Target's first-quarter net earnings were $697 million or $1.04 per share, up from $689 million or $0.99 per share in the year-ago period.
Adjusted earnings per share rose to $1.11 from $0.99 in the same quarter last year. On average, 22 analysts polled by Thomson Reuters expected the company to earn $1.01 per share. Analysts' estimates typically exclude special items.
Total revenues for the quarter grew 5.9 percent to $16.87 billion from $15.94 billion in the prior-year quarter. Analysts had a consensus estimate of $16.83 billion.
Looking ahead to the second quarter, Target forecasts adjusted earnings per share of $1.04 to $1.14 and reported earnings per share of $0.94 to $1.04. Analysts expect earnings of $0.99 per share.
For fiscal 2012, Target raised its guidance by 5 cents and now expects adjusted earnings per share of $4.60 to $4.80 and reported earnings per share of $4.10 to $4.30. Earlier, the company expected full-year adjusted earnings per share of $4.55 to $4.75 and reported earnings per share of $4.05 to $4.25.
Analysts expect the company to earn $4.28 per share for the year.
Gregg Steinhafel, chairman, president, and chief executive officer of Target said, "While our outlook for the remainder of 2012 reflects continued economic uncertainty, we are confident in our strategy, keenly focused on delivering an affordable and inspirational merchandise assortment to our guests and committed to making thoughtful investments in our U.S. and Canadian business segments that we expect will reward our shareholders over time."
TGT closed Tuesday's trading at $55.08, up $0.16 on a volume of 4.38 million shares. In Wednesday's pre-market, the stock is adding $1.20 or 2.18 percent to $56.28.
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