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Target Corp. yesterday reported a $135 million pretax loss for its credit card segment for the fourth quarter ended Jan. 31. That compares with a $189 million profit the segment generated during the fourth quarter ended Feb. 2, 2008. The company attributes the segment's loss to the need to add $245 million to credit card loan-loss reserves as the economic downturn caused charge-offs to soar during the quarter. Target added $440 million to its loan-loss reserves during all of fiscal 2008. Profit from Target's credit card segment for the fiscal year declined 80.6%, to $155 million from $797 million in fiscal 2007. Douglas Scovanner, Target executive vice president and chief financial officer, told analysts during a conference call yesterday that, despite the sharp loss during the quarter, the company expects credit card write-offs to stabilize during the next two quarters. "Overall, this means that we're highly likely to return to moderate rates of profitability in (the credit card) segment in the next two quarters, but not likely as strong as the profits we generated during the first two quarters of 2008," he said. Though Target customers "don't live on Wall Street," the company attributes its sharp uptick in credit card write-offs to the banking meltdown last fall, Scovanner said. "You can almost trace it to the weekend that Lehman failed and the Merrill Lynch-Bank of America transaction was announced," he said. Target is "quite delighted" with its relationship with JPMorgan Chase & Co., in which Chase is helping to manage card-portfolio risks with improved underwriting standards and collection practices, he added. Target sold 47% of its credit card receivables to Chase last May. The credit card segment's results helped to drive down Target's overall earnings to $609 million for the quarter, a 40.9% decline from $1.03 billion a year earlier.
