Target Cards Grow 24 Percent as Retailer Plans Sale

An executive at Target Corp. said yesterday the company will make a decision on its plans for its $7.6 billion credit card portfolio by the end of the year. The company announced in September it was considering selling the portfolio ("Target Confirms Card Portfolio on the Block," Sept. 13).

Doug Scovanner, chief financial officer and executive vice president of the retail giant, said Target is reviewing its plans for the portfolio and plans to make an announcement in December.

Scovanner was commenting during a conference call with analysts following Target’s release of its third quarter results.

The Target card portfolio grew its receivables 24 percent to $7.6 billion at the end of quarter on Nov. 3rd, compared with $6.1 billion in the same period a year ago. The rise was partially due to consumers shifting from the Target proprietary card to the retailer’s higher-limit cobranded Visa card, Target reported.

Net write offs rose more than 27 percent to $107 million from $84 million. The net write off ratio for average receivables was 5.8 percent, up from 5.5 percent. Target increased its bad debt provision 34 percent to $130 million from $97 million. The 90 day delinquency rate was 2.6 percent, up from 2.5 percent a year ago.

Target’s card division generated revenues of $493 million, up 19 percent from $414 million a year ago. Earnings before taxes and interest for the card division were $157 million, a 17 percent rise. 

Scovanner said the card unit should “enjoy strong growth in receivables, driving revenue growth, and strong contribution to earnings, reflecting disciplined management of our portfolio with delinquency rates and net write-off rates most likely to remain within the range implicit in our current balance sheet reserve.

“As a result, we expect to continue to enjoy substantial strategic and financial benefits of our credit card operations regardless of who actually owns our receivables,” said Scovanner.