Despite sluggish consumer spending, uncertain economy, discount retailer and general merchandiser, Target Corporation, (NYSE: TGT) reported better-than-expected fiscal second quarter results thanks to rising sales due to expansion of food sections. The company has also lifted its full-year outlook.
For the quarter, the companyâ€™s earnings stood at $1.06 per share, a climb if 3.4% from $1.03 earned in the year earlier quarter, beating analystsâ€™ consensus estimate of $16,769 million.
After excluding costs associated to its Canadian operations, Â Targetâ€™s earnings from U.S. operations stood at $1.12 per share- an increase of Â 4.6% from year earlier quarterâ€™s earnings of Â $1.07 a share.
The company reported that total revenue rose 3.3% to $16,779 million while analystsâ€™ consensus estimate was at $16,769 million. Retail sales rose 3.5% to $16,451 million despite the overall consumer spending remaining subdued amid economic uncertainty and high level of unemployment.
Headquartered in Minneapolis, Minnesota, Target said that same-store sales for the quarter climbed 3.1% compared to a growth of 3.9% in the corresponding period of the last year.
While the number of transactions increased by 0.7%, average transaction amount leaped 2.4% in the quarter as expansion in food sections helped generating higher sales.
The company said that gross profit at the retail unit rose 2.6% to $5,154 million; nonetheless, gross margin fell to 31.3%, since the rate of increase in sales was not sufficient to offset a 3.9% jump in cost of sales. The operating income from retail segment climbed 2.9% to $1,181 million, even as operating margin remained almost unchanged at 7.2%.
The company reported that revenue from the Credit Card segment contracted 5.1% to $328 million for the quarter, while the profit from this segment fell to $140 million from $171 million, in the corresponding period of the last year.
Companyâ€™s credit card penetration grew by 7.7%, while debit card penetration rose by 5.5 percent in the fiscal second quarter. Total store REDcard penetration leaped to 12.8% from 8.7% in the year earlier quarter.
For the third quarter, the company now expects earnings to fall between 83 cents and 93 cents a share.
For fiscal year 2012, the company has revised earnings to come between $4.65 and $4.85 per share, up from earlier estimation of $4.60 to $4.80.