Target Corp., buoyed by its push into groceries and incentives offered to credit card holders, posted a 3.7 percent increase in second-quarter profit and said earnings for the year will beat Wall Street estimates.
Target is counting on two key initiatives to drive revenue -- its larger food offering and the 5 percent discount it began offering in October to customers who pay with Target branded credit and debit cards.
As a result of its strategy, Target had a 3.9 percent increase in revenue at stores opened at least a year -- a key indicator of a retailer's health because it excludes results from stores that recently opened or closed. That was up from a 2 percent pace in the first quarter.
"We're very pleased with our second-quarter financial results," said Gregg Steinhafel, Target's chief executive, in a statement. "We continue to focus on strong execution of our strategy, preparing Target to perform well in a variety of economic environments."
Target, based in Minneapolis, said it earned $704 million, or $1.03 per share, for the second-quarter ending July 30. That compares with $679 million, or 92 cents per share, in the same period a year ago. Revenue rose 4.6 percent to $16.24 billion, up from $15.53 billion. Analysts were expecting 97 cents per share on revenue of $15.9 billion.
Target's credit card business reported a profit of $171 million in the quarter, up from $138 million in the year-ago period.
Analysts say Target is winning customers from rival Wal-Mart Stores Inc., the world's largest retailer. Target's results come a day after Wal-Mart posted its ninth straight quarter of declines in revenue at U.S. Walmart stores open at least a year.