Target's 3Q profits bode well for holiday season, analysts sayby Martin Moylan, Minnesota Public Radio
St. Paul, Minn. — Some analysts say Target's bigger-than-expected jump in quarterly profits announced Wednesday bodes well for the company's holiday sales performance.
For the three months ending Oct. 29, sales at Target stores open at least a year — a key industry benchmark — rose about 4 percent. That was mostly due to the company's credit card rebate and grocery initiatives.
Target had net income of $555 million in the quarter, about 4 percent more than it earned a year earlier.
Edward Jones retail analyst Matt Arnold said Target could see sales in its current quarter rise about 4 percent, too, because the retailer is in sync with most consumers.
"Many are budget constrained, and Target is sharp on pricing," Arnold said. "They do good merchandising and adding elements of quality and fashion to their goods as well. So it's a combination that should win in the holiday."
Target's performance was impressive, given that its credit card rebate and grocery sales efforts can eat into profits, Arnold said.
"The retail business saw good gross margin performance, even though there's a conscious effort to promote the 5 percent rewards program and increase sales of food and consumables, which can be a drag," he said.
Target's quarterly sales increase was largely driven by its increased emphasis on groceries and the 5 percent discount given to Target credit cardholders.