NEW YORK — Target Corp. Thursday said its second-quarter profits increased nearly 13 percent, largely due to higher food sales and revenue from its credit card business.
Net earnings in the quarter ended July 29 rose to $609 million, or 70 cents per share, compared with $540 million, or 61 cents per share, in the second quarter last year. Wall Street analysts' average forecast was 69 cents a share.
Total revenues in the quarter increased 11.3 percent, to $13.3 billion from $11.9 billion in the same period in 2005, driven by new store expansion and credit card operations. Same-store sales in the second quarter rose 4.6 percent. Sales for the period rose 11.1 percent, to $12.96 billion from $11.67 billion a year ago.
On a conference call with analysts, Target's chairman and chief executive officer, Bob Ulrich, said he was confident the Minneapolis retailer could sustain strong growth in spite of worrisome signs in the economy.
"We continue to believe Target will deliver strong sales and profit performance in 2006 and generate another year of profitable market share growth even in light of the challenges posed by the current economic environment," said Ulrich.
"For more than 10 years, we have executed successfully this approach by anticipating shifts in guest preferences, refining our merchandising and marketing to adapt to various economic challenges, and overcoming competitive threats to produce strong sales and earnings growth," he added. "Though the current marketplace continues to be highly competitive and the macroeconomic environment, in the near term, appears uncertain, we are confident that...we can translate our core strategy and brand promise into continued profitable market share growth."
The retailer considers Wall Street's average profit projection of $3.11 per share for the year to be reasonable.
Ulrich said the company is on track to open its 2,000th Target in the U.S. in 2011, when it will also hit the $100 billion annual sales mark.
To achieve those goals, the retailer will have to compete with an increasingly trend-conscious Wal-Mart, which has shown its willingness to attack Target's strength in apparel and design. Wal-Mart is remodeling stores and introducing new brands, such as Metro 7, for fashion-conscious women.In fact, the specter of Wal-Mart wasn't far from the minds of Target executives during the call. "Even as some of our competitors test new merchandise brands and upgrade merchandise quality and focus on marketing, we are growing our own brands, aggressively increasing content, improving our supply chain and speed to market, and delivering an exciting shopping experience," said Gregg Steinhafel, president. "We continue to differentiate ourselves through our own brands."
Go International capsule collections have been designed by Luella Bartley and Tara Jarmon and now include Paul & Joe, designed by Sophie Albou. "The [Go International] collection, though not an important driver of sales volume, is an exciting addition to our fall offering for juniors," Steinhafel said.
Target hopes to drive sales with a new "high-quality, wear-to-work suiting collection" called Merona, bowing in September, Steinhafel said. "Merona will cater to body types and personal tastes and offer incredible flexibility for guests to mix and match jackets with pants and skirts.
"We're refining our assortment and reinventing entire categories throughout the store," he added. "We've updated our approach to the dollar-store shopping concept. We're introducing better-quality products priced at two for $5, in addition to the $1 offerings. We've reinvented apparel and hosiery. We've introduced improvements in fit, fabric, design and fabrication in apparel, sleepwear and hosiery."
Asked by an analyst whether Target has any leeway in hiking unit prices as it educates consumers on product benefits, Steinhafel said, "We believe that over the long term we absolutely have an opportunity to increase the price per item. We can increase our retail price in any part of the store. In ready-to-wear, accessories and intimates, we've seen higher prices."
Yet as bright as prospects are in health and beauty aids, apparel, accessories and electronics, Target continues to have trouble with prerecorded music and videos, home furnishings such as bedding and rugs, and decorative accessories, where sales continued to be somewhat disappointing in the quarter.
Target remains committed to its "expect more, pay less" strategy, but may tweak the message if consumer spending begins to slow down. "During a tougher macroeconomic environment, we'll focus slightly more on the ‘pay less' part of the equation and make sure our content and marketing presentation speaks more to price at a time when price becomes slightly more important to the consumer," Steinhafel said.Target, which operates 1,444 stores in 47 states, opened 26 general merchandise stores and three SuperTarget units in the quarter. In the next few months, the company will add 45 general merchandise stores and 15 SuperTargets. "We continue to invest in new Target stores," said Doug Scovanner, chief financial officer.
"The third quarter will be a bit more challenging," Ulrich said, noting the company faces difficult comparisons; same-store sales rose 5.9 percent in the third quarter of 2005. In addition, the company expects credit card delinquencies to rise in the third quarter, but Scovanner said Target has built up reserves of $501 million.
The company repurchased $550 million of its common stock during the second quarter, acquiring 11.3 million shares.
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Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion
Eighty degree temperatures and outdoor installations at the annual Art Basel Miami Beach called for bright, elevated beachwear. See more street style pictures on WWD.com. #theyarewearing #ABMB (📷: @lifeinreverie)
Following September’s emotional tribute to her brother Gianni, Donatella Versace wanted to bring the spring show’s deep sense of intimacy to her @versace_official pre-fall collection. Donatella found inspiration in Versace Palazzo in Milan and from Gianni’s opulent apartment. Archival patterns and new motifs were splashed on silk shirtdresses and fitted jersey frocks. See the rest of the photos on WWD.com. #wwdfashion
Demna Gvasalia continues to shake up the Paris fashion calendar — and experiment with new runway timetables for his @vetements_official brand. WWD has learned that Vetements plans to stage its next coed show for the fall 2018 season on January 19 during Men’s Fashion Week in the French capital. Details about the timing and venue have not been confirmed — stay tuned on WWD.com to catch the latest. #wwdnews (📷: @giovanni_giannoni_photo)
@zacposen's go-to holiday gift? Cookies! "I'll usually bake cookies and send them as a gift," said the designer, who recently released his cookbook "Cooking With Zac: Recipes from Rustic to Refined." Get the recipe for his Brown Butter-Chocolate Chip Cookies via link in bio 🍪🍪🍪 #wwdeye #cookingwithzac
For @monsemaison’s pre-fall 2018 collection, Fernando Garcia and Laura Kim honed in on the brand’s many signatures — men’s wear, which was tweaked and feminized through deconstruction, proportion play and lots of bare shoulders. See the rest of the photos on WWD.com #wwdfashion (📷: George Chinese)
On Friday night, @yohjiyamamotoofficial received the Design for Asia Lifetime Achievement Award in Hong Kong. The 75-year-old designer has been celebrated for many years and is best known for his dark and avant-garde tailoring. “In my long career, in design, architecture, [I’ve been to] so many parties, this is the very first time that I have such a warm feeling, I really appreciate this,” Yamamoto said. #wwdfashion (📷: @dominiquemaitre)