Target (TGT) reported Q2 EPS upside ($0.82 vs. $0.76 consensus) and in-line revenue ($15.47 billion vs. $15.46 billion). Same-store sales dropped 0.4% despite the impact of tax rebate checks. Moreover, same-store sales have gotten even worse since the end of the quarter. July was down 1.2% and August will likely be down even more.
Target’s internal credit card segment also continues to get hammered by weakening consumer credit:
Segment profitability in the quarter declined 65 per cent to $74 million from $213 million in the same period a year ago, as a result of a decline in overall portfolio yield, combined with Target’s reduced investment in the portfolio. This yield decline is attributable to higher bad debt expense resulting from an increase in current period write-offs combined with additions to the reserve for future periods, as well as the impact on portfolio yields of lower interest rates.
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