Target Corp. is benefiting from the economic downturn, while other retailers are getting battered by it.
The discounter, based in Minneapolis, on Wednesday posted second-quarter profit and revenue that beat Wall Street estimates in part because of a growing frugal trend among Americans who are concerned with job security and other economic woes. Target said that while cost-conscious customers in general are making fewer shopping trips overall to save money on gas, they're increasingly coming into its stores for their one-stop shopping needs.
"We do believe that we are gaining some of the trip consolidation," said Kathy Tesija, Target's executive vice president of merchandising. "We think we're benefiting across all income levels."
Consumers have been changing their shopping habits during the economic downturn as they're being squeezed by rising food costs, high unemployment and weak job and housing markets. Retailers have had to adapt by keeping inventory fresh, offering incentives and discounting.
Target said its results were buoyed by its push into the grocery business, which allows it to offer customers more food items to snap up during their shopping trips. The retailer also said it benefited from the 5 percent discount program it launched in October for customers who pay with Target branded credit and debit cards.
Target said profit rose 3.7 percent to $704 million, or $1.03 per share, for the quarter that ended July 30. That compares with $679 million, or 92 cents per share, a year earlier. Revenue rose 4.6 percent to $16.24 billion. Analysts were expecting earnings of 97 cents per share on revenue of $15.9 billion.
Revenue rose 3.9 percent at stores opened at least a year ---- a key indicator of a retailer's health. Target said shoppers bought more clothing and home furnishings, as well as groceries and beauty products. Some shoppers also traded up to higher-end home brands like Fieldcrest.
Target shares rose $1.31, nearly 3 percent, to $50.68. That's at the mid-point of its 52-week range of $45.28 and $60.97.