Target profits score 25 percent increase

MINNEAPOLIS — Helped by a strong credit card business, another strong performance at Target Stores, and sharply improved earnings at Mervyn's and Marshall Field's; Target Corp. drove first-quarter profits up 25.4 percent, to $438 million from $349 million last year.

Sales at the diversified retailer, including credit revenues, climbed 12.3 percent, to $11.6 billion from $10.3 billion a year ago.

Providing a lift to earnings, and italicizing the growing importance of its relatively new credit card business, earnings from the credit operation increased 9.9 percent, to $166 million from $151 million.

The lucrative credit business now accounts for almost 38 percent of Target's total profit, but only 9 percent of its sales.

Providing another lift to the bottom line was an earnings turnaround at two laggard divisions now officially on the block — Mervyn's and Marshall Field's.

Even though sales declined 1.4 percent, Mervyn's boosted its bottom line 63.4 percent, to $39 million from $24 million last year.

The department store group pushed profits up 12.5 percent, to $22 million from $19 million, on a much smaller 4 percent increase at the top line.

The core Target mass merchant business pushed profits up 17.9 percent, to $866 million from $734 million last year. Sales climbed 14 percent, to $10.1 billion from $8.8 billion last year, and same-store sales grew 7.3 percent.

Average gross margin increased 50 basis points, or five-tenths of a percentage point, to 32.8 percent from 32.3 percent, on the strength of margin improvement at all three retail groups.

Acting as a partial offset, costs climbed 10 basis points, or one-tenth of a percentage point, to 23.5 percent from 23.4 percent.