Off Target
NEW YORK–Target Corp., the second-largest discount chain, said profit fell 41 per cent after it cut prices over the holidays and set aside more money for unpaid credit card balances.
Target said net income fell to $609 million (U.S.), or 81 cents per share, for the fiscal fourth quarter ended Jan. 31, from $1.028 billion, or $1.23 per share, a year ago.
Analysts, on average, had been expecting it to earn 83 cents per share.
Target said quarterly sales declined 1.6 per cent to $19 billion from $19.3 billion a year ago. Sales at stores open at least a year, a key gauge of a retailer’s health known as same-store sales, dropped 5.9 per cent.
Target said it cut prices to spur sales in the quarter, and customers gravitated toward buying more lower-margin, non-discretionary items, such as food or household cleaners.
Its profits are also being hit as more customers default on their Target credit card bills.
Target’s credit card segment reported a pre-tax loss of $135 million, compared with profit of $189 million a year ago. The Minneapolis-based retailer said the loss was due to a $245 million addition to the allowance for doubtful accounts short term personal loan. Target sold almost half of its credit card portfolio to JPMorgan Chase & Co. last year.
Known for affordable designer goods, Target also faced increased competition from department stores that discounted heavily. Target said last month it’s eliminating 9 per cent of its headquarters workforce, cutting about 600 employees and 400 open positions, and closing an Arkansas distribution centre employing 500 people.
The results, which mark Target’s sixth consecutive drop in quarterly profit, come as its shoppers shift spending to basics.
More than 40 per cent of Target’s revenue comes from non-essentials such as funky jeans and quilts – but the cheap-chic formula has now become a drag as shoppers fixate on the lowest prices.
Target said it is giving more shelf space in new and remodelled stores to food and pharmacy products rather than trendy fashions.
From the Star’s wire services
Filed under: money by Specialist