A drop in sales and escalating credit card woes were the main theme of Target’s fourth quarter earnings report.
The retail giant suffered from a drop in consumer spending and announced that sales fell 1.6 percent in the fourth quarter to $19.0 billion due to a 5.9 percent slide in comparable store sales.
Meanwhile, Target reported a $135 million pre-tax loss for its credit card segment where one year ago the company earned a $189 million profit. The loss stems from the company’s need to set aside additional funds for mounting bad credit card accounts.
The Wall Street Journal reports that Target has struggled with rising delinquencies and charge-offs in the past few months.
According to the Journal, the growing problems at the company are forcing it to take some cost-cutting initiatives which include tightening credit card underwriting and cutting back new store openings.
Tougher underwriting standards could mean consumers might have a harder time obtaining a new retail credit card. Furthermore, a number of lenders have responded to rising defaults by raising interest rates, cutting credit limits and canceling unused accounts.
Looking forward, the company said it will do more to cater to its customers. Target’s president and CEO Gregg Steinhafel said that in 2009 it will be “offering even more compelling prices on quality products in combination with a superior shopping experience.”
Target, like other retailers, faces waning consumer confidence. A recent economic indicator showed that consumers’ faith in the economy and job security was low.
However remarks yesterday from Federal Reserve chairman Ben Bernanke suggest that if government stimulus actions take hold, the economy could come out of the recession by year end and begin a recovery phase in 2010.
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