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Target (TGT) profit sinks on credit-card woes

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Climbing the stairs of Target StoresThis morning, Target Corp. (NYSE: TGT) reported grim numbers for its fourth-quarter ended January 31. Profit dropped 41% to $609 million, or 81 cents per share (two cents below analysts' estimates). In the year-ago period, the discount chain banked $1.03 billion, or $1.23 per share.

Revenue, meanwhile, dipped 1.6% to $19.02 billion (south of the Street's $19.5 billion consensus view), and same-store sales were down 5.9%. For fiscal 2008, profit dropped 22% to $2.86 per share and revenue edged 2.3% higher during the year to $62.88 billion. The stock has dropped nearly 3% in early trading and is within a chip shot of its 52-week low of $25.60.

In addition to crimped consumer spending, rising unemployment numbers and an unsettling economic landscape have created challenges for Target's credit-card business. The retailer's credit-card unit took a one-time, pre-tax loss of $135 million during the quarter as TGT had to add $245 million in reserves to cover delinquencies.
Target is a discount chain, indeed, but it commands that position of oxymoron -- it's a high-end discount store. For health and beauty aids, food products, household goods, and other necessities, consumers may be opting for warehouse clubs, deep-discount ("dollar store") chains, or Wal-Mart Stores Inc. (NYSE: WMT). A recent Target advertising campaign claimed the store has everything [shoppers] want, and everything [they] need. True, but others may have the stuff cheaper.

Beth Gaston Moon works for WeSeed.com, "The stock market for the rest of us." The above comments are not intended as trading or investment advice.

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Last updated: November 25, 2009: 02:13 PM

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