Target earnings up, but not as strong as hoped for

Groceries, store remodeling, and credit cards helped Target boost its net income to $704 million, up nearly 4 percent for the company's second quarter.

The discount retailer said its Target-branded credit card that offers a 5 percent discount helped boost sales. And the company's credit card business was more profitable as the portion of bad debts fell by nearly half compared to the same period last year.

Sales at stores open at least a year rose a 3.9 percent, but Target's executive vice president for merchandising, Kathee Tesija said there's a split in consumer buying patterns.

Higher-income households tend to be more optimistic about the current economy, Tesija said. The wealthiest 20 percent of households shop more often and spend more than the remaining 80 percent, who shop less frequently and spend less.

But sales this year are weaker than the company had expected, and the "supercharged" financial performance of the credit card business is not likely to last, said Doug Scovanner, chief financial officer for Target.

"We did not expect the first quarter to be as soft as it was," Scovanner said. "Our sales aren't likely to be as strong in the third and fourth quarters, but that view has not changed in the last few weeks."

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