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Target profits score 25 percent increase

Don Hogsett -- Home Textiles Today, May 17, 2004

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.

Target Corp.

Qtr. 5/1 (x000) 2004 2003 % chg
Sales $11,249,000a $9,983,000a 12.7
Oper. income (EBIT) 1,193,000 1,022,000 16.7
Net income 438,000 349,000 25.4
Per share (diluted) 0.48 0.38 24.6
Average gross margin 32.8% 32.3% --
SG&A expenses 23.5% 23.4% --


First quarter segment results

2004 2003 % change
TARGET
Sales $10,051,000 $8,819,000 14.0
Same-store sales -- -- 7.3
Pre-tax profit 866,000 734,000 17.9
MERVYN'S
Sales 793,000 804,000 -1.4
Same-store sales -- -- -1.4
Pre-tax profit 39,000 24,000 63.4
MARSHALL FIELD'S
Sales 614,000 590,000 4.0
Same-store sales -- -- 6.1
Pre-tax profit 22,000 19,000 12.5
CREDIT CARDS
Sales 318,000 320,000 -0.5
Pre-tax profit 166,000 151,000 9.9


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