Like most retailers, Target's challenge has been luring shoppers into stores during an uncertain economic climate that has them scrutinizing every purchase. While there have been some improvements in the economy, the job and housing market remain shaky. Unemployment is hovering at an uncomfortable 8.3 per cent.
Target, which sells clothes and trendy decor under the same roof as toothpaste and cereal, has reached out to customers with two growth initiatives. It has been offering a larger selection of foods and also a program it started in 2010, which gives shoppers a 5 per cent discount when they pay with Target-branded credit and debit cards.
It has also expanded into urban markets using smaller versions of its big-box stores. It said Wednesday that it was pleased with the performance of its first three City Target locations in Seattle, Los Angeles and Chicago. It's now looking outside the country for growth as well. Target is preparing to move into Canada next year, its first expansion outside the U.S. It will soon begin opening the first of between 125 and 135 stores at store locations once owned by Zellers, Canada's second-largest discount chain.
And the retailer announced last month that it was teaming up with luxury merchant Neiman Marcus to offer a limited collection spanning from fashion to sporting goods for the winter holidays. More than 50 products from 24 designers, including Oscar de la Renta and Diane von Furstenberg as well as younger designers such as Derek Lam, will be available at both stores and online starting Dec. 1.
Target posted earnings Wednesday of $704 million, or $1.06 per share in the period ended July 30. That compares with $704 million or $1.03 per share, in the year ago period.
Excluding expenses tied to Canada, Target earned $1.12 per share, which easily topped expectations of $1.01 per share on Wall Street, according to FactSet.
Overall revenue rose 3.5 per cent to $16.45 million in the quarter. Analysts had expected $16.75 million. Revenue at stores opened at least a year rose 3.1 per cent.
The company expects earnings per share in the current quarter to be anywhere from 83 cents to 93 cents. Analysts surveyed by FactSet expected 77 cents. Target also raised its profit guidance for the year by a nickel to $4.65 to $4.85 per share. Analysts had been expecting only $4.30 per share.
Shares of Target Corp., based in Minneapolis, rose 82 cents to $64.20 in premarket trading.