Minneapolis – Target’s
fourth-quarter earnings rose 10.5 percent to $1 billion on soaring credit card profits
and strong retail operating margins.
Net sales rose 2.8
percent to $20.3 billion for the three months ended Jan. 29, and comp-store
sales increased 2.4 percent.
The credit card segment,
which Target is looking to sell, posted a 287-percent spike in fourth-quarter
profits, to $151 million.
In a conference call,
merchandising executive VP Kathee Tesija acknowledged that Target’s CE,
entertainment and home product businesses are “more difficult” than other
merchandise sectors.
However, she said the CE
department will be boosted by the addition of 600 RadioShack-operated mobile kiosks
by June, for a total of 1,450 installations, plus the March launch of
Nintendo’s 3DS handheld gaming system. Target is “over-indexed with Nintendo”
as a family-focused retailer, Tesija noted, and the chain’s 5-percent cashback
program, through its private-label credit card, will provide a price advantage
with the device’s controlled $249.99 retail.
Despite challenges within
certain CE categories, the department remains “a very productive part of the
store,” and Target has no plans to dramatically reduce its packaged media assortment.
“We’ve cut space there over the last several years but we picked it up in
digital sales,” she said.
Outside the stores, the
company continues to invest in m-commerce, which tripled in growth and
represented 8 percent of its online page views last year. Target is also
developing its own e-commerce platform in anticipation of severing its ties
with third-party provider Amazon.com in the third quarter.
Despite the solid
quarterly report, Tesija said consumers remain value-focused, risk-averse and
concerned about their jobs. They’re choosing good, rather than better and best
products, and are using the savings to splurge only occasionally on premium
items.
“Consumers think and
behave differently,” she said. “There’s a new economic reality.”
