Minneapolis — The faltering economy took a steep toll on Target’s retail and credit card businesses in the fourth quarter, sending net earnings down nearly 41 percent to $609 million and sales down 1.6 percent to $19 billion for the three months ending Jan. 31.
Same-store sales declined 5.9 percent from the year-ago period, the discount chain reported.
"Our financial results … reflect the impact of unprecedented economic conditions on both of our business segments," chairman, president and CEO Gregg Steinhafel said in a statement.
On the retail side, earnings before interest expense and income taxes (EBIT) fell 23 percent to $1.3 billion, and gross margin rate decreased 1.4 percentage points, driven by increased markdowns and a higher mix of lower-margin categories as demand shifted toward non-discretionary products. Going forward, Target will focus on beefing up those categories, including food, health care and sundries, executives said in a conference call.
Meanwhile, the credit card segment incurred a $135 million pre-tax loss as a result of a $245 million addition to cover delinquent accounts.
Target reduced its selling, general and administrative (SG&A) expense by $27 million during the quarter despite higher costs associated with last month’s workforce reduction and the addition of 91 more stores year over year. The chain attributed its success in controlling expenses to "continued productivity gains in stores combined with disciplined and thoughtful control across the company."
Target operates 1,677 stores in 48 states and its credit card segment offers branded proprietary and Visa credit card products.
Looking ahead, Steinhafel said "We are focused on continuing to grow our market share profitably — offering even more compelling prices on quality products in combination with a superior shopping experience.
"At the same time," he added, "we will continue to be thoughtful in our deployment of capital, ensuring that we preserve liquidity and make prudent investment decisions to create long-term shareholder value. We believe this will position Target to emerge as an even stronger retail leader when the consumer environment improves."