Target Corp. raised its profit outlook Wednesday after reporting better-than-expected first-quarter results that were boosted by increased spending on food and cheap chic fashions.
Like most retailers, Target has had the challenge of finding ways of luring cautious U.S. shoppers into stores amid a flood of mixed economic news that has them scrutinizing every purchase. The job and housing markets are still shaky, but falling gas prices have given consumers hope.
Target, which mixes stylish clothes and trendy decor with toothpaste and cereal, recently has had success drawing customers into stores with two growth initiatives. It has been offering a larger selection of foods and in 2010, it started a program that gives shoppers a 5 percent discount when they pay with Target-branded credit and debit cards.
The retailer, based in Minneapolis, said profit rose 1.2 percent to $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. Excluding costs associated with its expansion into Canada next year, the per-share results would have been $1.11. Revenue rose 5.9 percent to $16.86 billion.
Results beat the profit 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.
To boost sales, the company has teamed up with unique specialty shops to offer limited edition merchandise, from dog biscuits to platform shoes. The shops were launched earlier this month. The discounter also plans to create mini shops of Apple products in 25 of its stores this year.
Additionally, Target has teamed up with designer Todd Oldham and will be launching an exclusive collection of art supply and activity kits for children under the name Kid Made Modern for the fall.
The company is also preparing to expand into Canada next year, its first expansion outside the U.S. It's poised to begin opening the first of between 125 and 135 stores in Canada at former Zellers locations acquired from Hudson's Bay Co.