Consumers Have Trouble Making Target Card Payments
Thur, Oct 23, 2008
Shares of Target Corp. slipped Wednesday as the retailer offered more evidence that its customers had trouble making their credit card payments in September.
Shares declined $2.71, or 7.2 percent, to $34.99 in afternoon trading -- not far off their 52-week low of $33.96.
Target said its net charge-off rate, or the amount of loans written off as not being repaid compared with the size of the entire lending portfolio, rose 10.1 percent in September.
Citi Investment Research analyst Deborah L. Weinswig said she is approaching the second half of 2008 and 2009 with a "very cautious" outlook for consumers and believes Target's credit card business will face "significant" headwinds for the rest of this year and next.
Weinswig said the rise in net charge-offs in September reflects tight credit for consumers and rising debt.
Weinswig, who rates the stock "Sell," also thinks delinquencies will rise as consumers face slowing income growth and a rising cost of living.
Buckingham Research Group analyst John Zolidis, who rates shares of Target "Neutral," says the September data shows further deterioration, despite reductions in credit lines.
Target earned $74 million in its credit card operation for the three months ended Aug. 2, down 65 percent from a year ago. The company blamed the decline on lower investment in the portfolio, a higher bad debt expense resulting from higher write-offs in the current period and additions to the reserve for the future.
Source : http://www.businessweek.com/
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