Minneapolis First-quarter profits at Target Corp. dropped almost 8% on softer-than-expected sales and higher costs, but the retailer still beat Wall Street earnings estimates for its first quarter.
The retailer on Tuesday reported a profit of $602 million in the three months ended May 3, down from $651 million during the same period last year. Revenue rose 5% to $14.8 billion from $14 billion. Same-store sales fell 0.7%.
In a statement, president and chief executive Gregg Steinhafel said that the profit "met our expectations despite softer-than-expected sales performance." He added that "the current economic environment remains challenging."
The company said profit margins declined slightly from last year because sales grew faster in low-margin categories, which generally includes food and essentials such as paper towels.
The company also announced Tuesday that the transaction to sell an undivided interest in approximately 47% of its credit-card receivables to JPMorgan Chase for cash proceeds of about $3.6 billion was completed on Monday, May 19, 2008. The transaction is expected to provide Target with sufficient liquidity to implement its business plans, including previously announced capital investment and share repurchase activity, without the need to access term debt capital markets again this year.