Target Beats the Street, Reveals Upbeat Holiday Forecast

Target (NYSE:TGT) easily beat the Street on Wednesday with a 3.7% bump in third-quarter profits amid solid same-store sales growth, driving the discount retailer’s stock more than 3% higher.

Minneapolis-based Target also issued an upbeat forecast for the all-important holiday shopping season quarter despite the slow economic recovery.

The retailer said it earned $555 million, or 82 cents a share, last quarter, compared with a profit of $535 million, or 74 cents a share, a year earlier. Excluding one-time items, it earned 87 cents a share, blowing past consensus calls from analysts for 74 cents.

Revenue increased 5.1% to $16.4 billion, topping the Street’s view of $16.28 billion. Same-store sales climbed 4.3%, while gross margins contracted to 30.5% from 30.6%.

“We’re very pleased with our third quarter financial results, which reflect strong performance in our U.S. Retail and U.S. Credit Card segments,” CEO Gregg Steinhafel said in a statement.

Target said its third-quarter average receivables in its credit-card division declined 9.9% to $6.2 billion. Average receivables directly funded by the retailer slid 14% to $2.4 billion. However, bad debt expense declined to $40 million from $110 million and segment profit rose 10% to $143 million.

Looking ahead, Target said it sees fourth-quarter EPS ranging between $1.43 and $1.53. The midpoint of that range, $1.48, would exceed estimates for $1.47.

“We’re confident that we have the right strategy and team in place to drive continued strong performance this holiday season and well into the future,” Steinhafel said.

Shares of Target rallied 3.38% to $54.98 ahead of Wednesday’s opening bell, outperforming a 1% slide for the S&P 500 futures.

The better-than-expected results stand in contrast with retail leader Wal-Mart (NYSE:WMT), which on Tuesday posted EPS that missed estimates by a penny.