Sales Slowdown Drags on Target 4Q Profit

MINNEAPOLIS - Target said fourth-quarter profits slipped on poor holiday sales and a quirk in the earnings calendar, but results were slightly better than Wall Street had expected amid a dismal period for retailers.

The discount-store operator said Tuesday that earnings fell 8 percent to $1.03 billion, or $1.23 per share, from $1.12 billion, or $1.29 per share last year. Analysts polled by Thomson Financial were expecting $1.22 per share.

Revenue edged up nearly 1 percent to $19.87 billion, from $19.71 billion last year. Analysts expected revenue of $20 billion. Results were helped by new-store expansion and revenue from credit card operations. Sales in stores open at least one year, known as same-store sales, edged up 0.2 percent. The most recent fourth quarter was a week shorter than in 2006.

"These results fell short of our expectations as a more difficult economic environment and hesitant consumer constrained our sales growth," said Chairman and Chief Executive Bob Ulrich on a conference call.

Target Chief Financial Officer Doug Scovanner said the median Wall Street expectations of 73 cents per share for the first quarter, and $3.56 per share for the year, were a "reasonable range."

Scovanner said comparable-store sales are expected to rise 2 percent to 3 percent for the full year. He said the prediction for better results later this year is based on easier comparisons to the weak end of 2007, not a prediction about an economic rebound by the end of 2008.

Target shares rose $1.84, or 3.5 percent, to $55.09 in morning trading.

Target reported $137 million in pretax fourth-quarter profit from its credit cards, up from $122 million during the same period last year. Its provision for bad debts jumped 67 percent to $170 million.

Minneapolis-based Target said it repurchased 26.5 million shares for $1.45 billion during the quarter. In addition, it said has the right to buy another 4 percent of its outstanding shares. The options expire in April, May, and June.

For the full year, Target earned $2.85 billion, or $3.33 per share, up from a 2006 profit of $2.79 billion, or $3.21 a share. Revenue rose 6.5 percent to $63.37 billion, from $59.49 billion a year ago.

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