Target's grocery push ups second quarter profits

Target Corp., buoyed by its push into groceries and incentives it offers credit cardholders, posted a 3.7 per cent increase in second-quarter profit and said earnings for the year will beat Wall Street estimates.

Target is counting on two key initiatives to drive revenue–its larger food offering and its 5 per cent discount it began offering in October to customers who pay with Target branded credit and debit cards.

As a result of its strategy, Target had a 3.9 per cent increase in revenue at stores opened at least a year–a key indicator of a retailer's health because it excludes results from stores that recently opened or closed. That was up from a 2 per cent pace in the first quarter.

``We're very pleased with our second-quarter financial results,'' said Gregg Steinhafel, Target's CEO, in a statement. ``We continue to focus on strong execution of our strategy, preparing Target to perform well in a variety of economic environments.''

Target, based in Minneapolis, said it earned $704 million, or $1.03 per share, for the second-quarter ended July 30. That compares with $679 million, or 92 cents per share, in the same period a year ago. Revenue rose 4.6 per cent to $16.24 billion, up from $15.53 billion. Analysts were expecting 97 cents per share on revenue of $15.9 billion.

Target's credit- card business reported a profit of $171 million in the quarter, up from $138 million in the year-ago period. Target said that it expects full-year profits to be in the range of $4.15 per share to $4.30 per share. Analysts had expected $4.14 per share.

Target's results came a day after rival Wal-Mart Stores Inc., the world's largest retailer, reported a 5.7 per cent increase in second-quarter profits and raised its outlook for the year as it benefited from international sales growth and cost cutting. But the discounter was unable to stop a two-year sales slump at its Walmart stores in the U.S as customers continue to grapple with a weak job market and other economic woes.