NEW YORK (AP) — Target Corp. reported a 1.2 percent increase in first-quarter profit and raised its earnings forecast for the full year due to strong sales of its food and cheap chic fashions.
Target's results illustrate that Americans are beginning to spend cautiously as economic uncertainty persists. The job and housing markets are still shaky, but falling gas prices have given shoppers hope.
Target, which became a discount darling by offering stylish clothes and trendy decor under the same roof as toothpaste and cereal, has had some success with drawing customers in with a larger selection of foods and a program it started in 2010 that offers a 5 percent discount for those who pay with Target-branded credit and debit cards.
"We're very pleased with our first-quarter earnings, which benefited from better-than-expected sales," Gregg Steinhafel, Target's CEO, said in a statement.
The retailer, based in Minneapolis, earned $697 million, or $1.04 per share, in the quarter ended April 28. That compares with $689 million, or 99 cents per share, in the year-ago period. Revenue rose 5.9 percent to $16.86 billion. Results beat the earnings of $1.02 per share on revenue of $16.83 billion analysts polled by FactSet were expecting.
Revenue at stores opened at least a year rose 5.3 percent, the strongest performance in six years for that period. The measure is considered a key indicator of a retailer's health.
Going forward, Target faces some challenges. Some shoppers have been looking online for lower prices. And rivals are copying its formula of partnering with designers.
Also, like most retailers, Target's business in April was disappointing as warmer-than-usual weather earlier in the year pulled sales forward. But the company raised its full-year profit guidance by 5 cents. Target now expects earnings per share to be in the range of $4.60 per share to $4.80 per share. Analysts had expected $4.28 per share.
"While our outlook for the remainder of the 2012 reflects continued economic uncertainty, we are confident in our strategy," Steinhafel said.
Target's stock rose $1.20, or more than 2 percent, to $56.28 in pre-market trading..