Target Card Revenues Rise as do Losses

Mega-retailer and credit card issuer Target Corp. (NYSE: TGT) reported today its first quarter earnings fell more than 7 percent to $602 million, or 0.74 cents per share, down from 0.75 cents a share in the same period a year ago. Revenues for the period ending May 3 grew 5 percent to $14.3 billion from $13.6 billion in 2007, despite a 0.7 percent decline in comparable store sales.

Target announced today it had closed on May 19 on its sale of approximately 47 percent of its credit card receivables to JPMorgan Chase for cash of about $3.6 billion, ("Chase Buys Half Of Target Card Portfolio for $3.6 Billion,” May 6). Target plans to use the proceeds for capital investment and share repurchases, and avoid going to debt capital markets again this year.

Average credit card receivables in the quarter grew to $8.4 billion, from $6.5 billion in the first quarter of 2007, a rise of more than 29 percent. Revenues on the credit cards grew nearly 20 percent to $500 million.

However, Target increased its bad debt expense provision on its card portfolio to $590 million, from $504 million a year ago. Net write-offs increased to $161 million from $99 million a year ago. The annualized charge off rate rose to 7.6 percent from 6.0 percent. The ratio of accounts 60-days or more delinquent rose to 4.2 percent from 3.2 percent a year ago.