Minneapolis - Stronger-than-expected credit card profits offset disappointing retail sales to send Target's first-quarter earnings up 2.7 percent to $689 million.

Retail sales rose 2.8 percent to $15.6 billion during the three months ended April 30, and same-store sales increased 2 percent. Nevertheless, chairman/president/CEO Gregg Steinhafel described the retail results as "weaker than anticipated" despite incremental gains in traffic and sales from its 5-percent Target credit card rebate program and the addition of grocery departments throughout much of the chain. However, the two initiatives took a toll on gross margin rate, which declined to 30.4 percent from 31.3 percent during the year-ago period.

Going forward, the discounter will remain "focused on driving sales by providing value, quality and reliability to our guests and delivering on both halves of our â€˜Expect more, pay less' brand promise," Steinhafel said.