Target profits plunge following credit card losses
By Seamus McAfee | Published: February 25, 2009
Target Corp. reported a 41 percent decrease in fourth-quarter profit, ending January 2009, attributing the loss to a drop-off in retail sales and an increase in credit card delinquency.
Target, along with many other retailers, has struggled as consumers cut back on spending habits in the face of a sluggish economy. Target's company-owned credit card segment in particular has struggled significantly, with tripling bad-debt expenses and rising delinquency rates.
"Our financial results for both the fourth quarter and 2008 fiscal year reflect the impact of unprecedented economic conditions on both of our business segments," said Gregg Steinhafel, chairman, president and chief executive officer, in a company press release.
Target's credit card segment profit declined 80.5 percent to $155 million in 2008 from $797 million in 2007. Chief Financial Officer Douglas Scovanner said in press conference with analysts that he thought it was "highly likely" that Target's credit cards would return to profit levels within the next two quarters.
The retailer has announced measures to try and cut costs, including cutting 1,000 positions at its headquarters office, closing an Arkansas distribution center, and canceling planned store openings.
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