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Profit in Target Corp.'s credit card portfolio for the third quarter ended Nov. 1 dropped 83%, to $35 million from $202 million during the same period last year as the economic slowdown kept more individuals away from the company's stores and hurt the ability of others to make credit card payments. Fueled by the card portfolio's results, Target reported a 24% decline in overall earnings for the quarter, to $369 million from $483 million. "The increasing financial challenges and economic uncertainties facing American households continue to pressure our performance during the third quarter," Gregg Steinhafel, Target's CEO, said today during a conference call with analysts. He said Target added $104 million during the quarter to a reserve fund to cover future charge-offs as customers have trouble paying their bills. Stress in the credit card portfolio represents the second-largest challenge affecting the company's earnings in the near term, Douglas A. Scovanner, Target executive vice president and chief financial officer, said in a statement during the previous quarter's earnings call (CardLine, 8/20). At the time, Target was handling the hardship through "terms changes to existing cardholders combined with aggressive reduction of credit lines and significant tightening of all aspects of our underwriting," he said. Target temporarily suspended most of its share repurchase activity to protect the company's liquidity and debt rating, Scovanner said in a statement. Target also cut its 2009 capital-expenditure plan by about $1 billion. Target sold 47% of its credit card receivables to JPMorgan Chase & Co. in May.
