Card Group, and its Debt, Grow for Target During Weak Year

Target Corp., one of the last major retailers to issue its own credit card, reported today net earnings of $1 billion for its fiscal fourth quarter ending Feb. 2, down 8 percent from the same period a year ago. Last year’s quarter included one more week of sales.

For fiscal year 2007, Target’s net earnings rose 2 percent to $2.8 billion. Total revenues in the fourth quarter increased 0.8 percent to $19.872 billion from $19.71 billion in 2006. For fiscal 2007, total revenues increased more than 6 percent to $63.4 billion from $59.5 billion in fiscal 2006.

Credit card operations’ impact on full year earnings before taxes, net of the allocated interest expense, was $600 million, an increase of $103 million, or nearly 21 percent.

Executives reiterated during a conference call today that the company is still actively looking to sell its card operations. ("Target Cards Grow 24 Percent as Retailer Plans Sale," Nov. 21, 2007).

Card receivables totaled $8.6 billion at the end of the quarter, up nearly 29 percent from $6.7 billion a year ago.

Sixty-day delinquent accounts rose to 4.0 percent, up from 3.5 percent in the previous quarter, while 90-day delinquent accounts rose to 2.7 percent from 2.4 percent.

Provision for bad debt totaled $481 million in 2007, versus $380 million in the prior year. Target wrote off $132 million in card debt in the fourth quarter, versus $99 million in the same period a year ago. For the year, Target wrote off $428 million in card debt versus $314 million in fiscal 2006.