Target Says Credit Woes Hitting Customers

New York, NY, Oct. 23, 2008--Shares of Target Corp. fell to a five-year low Wednesday as the retailer offered more evidence that its customers had trouble making their credit card payments in September.

Shares declined $4.29, or 11.4 percent, to $33.41, earlier falling to thier lowest point in more than five years at 32.39.

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 also thinks delinquencies will rise as consumers face slowing income growth and a rising cost of living.

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.