A stronger credit-card business helped Target Corp.'s net income rise 2.7 percent in the first quarter, offsetting weak sales.
Target's credit-card business, which it uses to drive sales by offering a 5 percent discount, had to set aside less money to account for customers who didn't pay their bills.
The discounter said Wednesday it earned $689 million, or 99 cents per share, for the three months ended April 30. That compares with $671 million, or 90 cents per share, in the same period last year.
Total revenue rose 2.2 percent to $15.93 billion. Revenue at stores open at least a year rose 2 percent. The gauge is considered an important performance indicator because it excludes stores that recently opened or closed.
Analysts expected earnings of 95 cents on revenue of $15.99 billion, according to FactSet.
"Our first-quarter financial performance was the result of stronger-than-expected profitability in our credit card segment, which offset the impact of weaker-than-anticipated sales in our retail segment," Gregg Steinhafel, Target's chairman, president and CEO, said in a statement.
He noted that shoppers remain "cautious" in their spending.
The weak sales come even as the company has counted on two major initiatives to drive shoppers to its stores: expanding food at its discount stores and offering the discount if they use the store's branded debit or credit cards.
The selling price per item fell 2.6 percent in the quarter from the year-ago period, and Target's gross profit margin slipped to 30.4 percent during the first quarter from 31.3 percent in the first quarter of 2010.
Target's credit card business was strong. Quarterly profit was $194 million, compared with $111 million in the last year's quarter. Bad debt expense was $12 million in the period, down from $197 million in 2010.
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