Citing fewer defaults and a reduction in overall outstanding receivables, Target Corp.’s credit card unit more than doubled its profit during the third quarter, the company announced Wednesday.
The Minneapolis-based retailer said net income from its credit card operations rose 117% for the quarter ended Oct. 31, to $130 million from $60 million a year earlier, while average receivables declined 15.9%, to $6.9 billion from $8.2 billion. Credit card revenues for the quarter declined 22.2% to $379 million from $487 million a year earlier.
Fewer delinquent accounts and write-offs during the quarter were “the biggest factor” in the credit card unit’s performance, while “sequential declines” in receivables have significantly lowered Target’s bad-debt reserve, further reducing risk, Doug Scovanner, Target executive vice president and chief financial officer, told analysts during an earnings conference call.
The annualized charge-off rate on outstanding average gross credit card receivables declined 280 basis points, to 10.9% from 13.7% a year ago. Target’s loan-loss reserves totaled $775 million at the end of the quarter, down 22.5% from $1 billion a year earlier.
