Higher women’s apparel sales gave Target Corp. a second-quarter boost, but the company’s expansion is being held back by a lack of retail development.
Second-quarter net income for the three months ended July 31 increased 14.3 percent to $679 million, or 92 cents a diluted share, from $594 million, or 79 cents, a year earlier. Revenues advanced 3.1 percent to $15.53 billion from $15.07 billion, which included a sales gain of 3.8 percent to $15.13 billion from $14.57 billion. The balance of revenues was from credit card income. Comparable-store sales inched up 1.7 percent.
Gregg Steinhafel, chairman, president and chief executive officer of the Minneapolis-based retailer, said on a conference call with analysts on Wednesday that the U.S. economy poses challenges.
“While no one has a clear view of the future, recent results in both of our businesses and the economy reinforce our perspective that the current recovery will be slow and inconsistent,” he said.
Douglas Scovanner, executive vice president and chief financial officer, cited the slowed pace of new retail projects.
“If you look back over time when we were adding 80, 90, 100 stores or more a year, about two-thirds of our development, or new-store development, represented Target stores as a component of much, much larger retail developments,” he said. “That marketplace in this country is nearly at absolute zero.”
Target is the nation’s second-largest discount retailer after Wal-Mart Stores Inc., with 1,743 doors, and the company plans to add 10 stores this year, with another 20 units or more next year and more than 30 doors in 2012. Scovanner said the company was looking at opportunities in all 50 states.
Kathryn Tesija, executive vice president of merchandising, told analysts on the call that the company was gaining market share because it was delivering on the promise of its marketing mantra, “Expect More, Pay Less.”
“Sales in food and health care [products] continue to grow rapidly while driving store traffic,” Tesija said. “And guests continue to put a few discretionary items in their baskets when they visit. This led to a high-single digit increase in women’s apparel and shoes during the quarter, similar to first-quarter trends.”
Shares of Target rose 2.5 percent on Wednesday to close at $51.95 in trading on the New York Stock Exchange.
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