Store Numbers Right on Target

By Don Hogsett -- Home Textiles Today, 11/14/2005 12:00:00 AM

Minneapolis —

Driven by robust same-store sales, wider margins and a rapidly growing credit business, third quarter profits from continuing operations at Target Corp. jumped 34.5 percent, to $435 million from $324 million last year.

Net income declined 18 percent, to $435 million from $531 million, but the year-over-year comparison is skewed by one-time items related to the sale of Mervyn's, which inflated last year's profit by $207 million.

Sales during the third quarter climbed 11.7 percent, to $11.9 billion from $10.6 billion, and the crucial gauge of same-store sales improved 5.9 percent. Credit card sales raced ahead 18.1 percent, to $343 million from $290 million. Total revenues, including merchandise and credit sales, rose 11.9 percent, to $12.2 billion from $10.9 billion.

In another big lift to the bottom line, margins widened substantially, more than offsetting rising costs. Helped largely by a higher markup, average gross margin was strengthened 120 basis points, or 1.2 percentage points, to 32.3 percent from 31.1 percent during the same period a year ago. A lower markdown rate and a reduction in inventory shrinkage also helped to boost margins.

Hurt largely by the effects of three hurricanes, operating costs climbed 40 basis points, or four-tenths of a percentage point, to 23.5 percent from 23.1 percent.

Going forward, CEO Bob Ulrich said, “We will continue to grow market share profitably in this year's fourth quarter and well beyond.”

Target Corp.