NEW YORK – Target Corp. reported a 1.2 percent increase in first-quarter profit and raised its earnings forecast for the full year due to strong sales of its food and cheap chic fashions.
Target's results illustrate that Americans are beginning to spend cautiously as economic uncertainty persists. The job and housing markets are still shaky, but falling gas prices have given shoppers hope.
Target, which became a discount darling by offering stylish clothes and trendy decor under the same roof as toothpaste and cereal, recently has had some success with drawing customers with two growth initiatives. It has been offering a larger selection of foods and a program it started in 2010 that gives shoppers a 5 percent discount when they pay with Target-branded credit and debit cards.
The retailer, based in Minneapolis, earned $697 million, or $1.04 per share, in the quarter ended April 28. That compares with $689 million, or 99 cents per share, in the year-ago period. Revenue rose 5.9 percent to $16.86 billion. Results beat the earnings of $1.02 per share on revenue of $16.83 billion analysts polled by FactSet were expecting.
Revenue at stores opened at least a year rose 5.3 percent, the strongest performance in six years for that period. The measure is considered a key indicator of a retailer's health.
The strong showing came despite a weak finish to the quarter. Like most retailers, Target's business in April was disappointing as warmer-than-usual weather earlier in the year pulled sales forward.
Going forward, Target faces not only continued economic woes but increasing competition from rivals. To boost sales, the company has teamed up with unique specialty shops to offer limited edition merchandise, from dog biscuits to platform shoes. The shops were launched earlier this month. The discounter also plans to create mini shops of Apple Inc. products in 25 of its stores this year.
Based on better-than-expected first-quarter results, Target raised its full-year profit guidance by 5 cents. Target now expects earnings per share to be in the range of $4.60 per share to $4.80 per share. Analysts had expected $4.28 per share.
"While our outlook for the remainder of the 2012 reflects continued economic uncertainty, we are confident in our strategy," Gregg Steinhafel, Target's CEO, said in a statement.
Target's stock rose 84 cents to $55.94 per share.