Minneapolis — Target today reported a 7.5 percent drop in net earnings and a 5 percent drop in retail sales for its fiscal first quarter, ended May 5.
Net earnings were $602 million compared with last year’s $651 million.
In its retail sales segment, sales grew 5 percent in the first quarter to $14.3 billion in 2008, from $13.6 billion in 2007, due to the contribution from new-store expansion partially offset by a 0.7 percent decline in comp-store sales. Retail segment earnings before interest expense and income taxes (EBIT) were $959 million in the first quarter of 2008, down 2.2 percent from $980 million in 2007.
Target also announced that the transaction to sell an undivided interest in approximately 47 percent of its credit card receivables to JPMorgan Chase for cash proceeds of about $3.6 billion was completed on May 19. This transaction is expected to provide Target with sufficient liquidity to implement its business plans, including previously announced capital investment and share repurchase activity, without the need to access term debt capital markets again this year, the chain said.
"Our first-quarter earnings per share met our expectations despite softer-than-expected sales performance," said Gregg Steinhafel, president/CEO. "Though the current economic environment remains challenging, we will continue to generate long-term value for our shareholders by remaining focused on the disciplined execution of our strategy. In addition, we believe our shareholders will benefit over time from our significant share repurchase activity and the unique relationship that has been created through this innovative agreement with JPMorgan Chase."
As previously disclosed, beginning this quarter, the company is reporting two business segments for all periods presented: retail and credit card.
In its credit card segment, average credit card receivables in the quarter grew $1.9 billion, or 28.3 percent, from the first quarter of 2007, although quarter-end receivables declined $204 million, or 2.4 percent, from year-end 2007.
At the end of the fiscal first quarter the company operated 1,613 Target stores in 47 states.