Credit Card Performance Weighs Down Target in Quarter

General merchandise retailer Target Corp. (NYSE: TGT) today reported that its credit card operations saw income drop 65 percent, more than enough to wipe out a 7.2 percent increase in its retail operations.

As a result, the company reported net income of $634 million, or 82 cents a share, compared to $686 million, or 80 cents a share for the comparable year ago period, when there were more shares outstanding.

Credit card revenue jumped 10 percent, but the revenue gains were outstripped by losses including write-offs and an increase in loan loss reserves, even though the size of its portfolio was smaller than it was earlier in the year.

In May, Target closed its transaction to sell 47 percent of its credit card receivables to JPMorgan Chase for $3.6 billion (“Chase Buys Half Of Target Card Portfolio for $3.6 Billion,” May 6). That transaction was partially offset by a $1.8 billion increase in average receivables, so the net effect was that the average receivables directly funded by Target in the second quarter declined 19.8 percent to $3.6 billion from $4.5 billion a year ago.

“Our second quarter earnings per share modestly exceeded our expectations despite continued soft sales trends,” said Gregg Steinhafel, president and chief executive officer, in a prepared statement. “We continue to focus on driving our financial results through superior execution and discipline and by continuing to delight our guests with differentiated merchandise at a compelling value.”