Third quarter expense rate was essentially unchanged from prior year, while the contribution from credit card operations remained strong. (Gross margin rate represents sales less cost of sales expressed as a percentage of sales. Expense rate represents selling, general and administrative expenses expressed as a percentage of sales.)
The contribution from the company's credit card operations to third quarter earnings before taxes (EBT), net of the allocated interest expense, was $157 million, an increase of $23 million, or 17.1 percent, from the same period in 2006.
This increase was driven by strong revenue growth, offset by higher bad debt expense. Average receivables in the quarter increased 19.6 percent over 2006, partially driven by a product change from proprietary Target Cards to higher-limit Target Visa cards for a group of higher credit-quality Target Card guests.
Net interest expense for the quarter increased $28 million compared with third quarter 2006 primarily due to higher average debt balances, including the debt to fund growth in accounts receivable.
The company's effective income tax rate for the third quarter was 38.1 percent in 2007 compared with 37.4 percent in 2006. For the full year, the effective income tax rate is still expected to increase modestly from last year's 38.0 percent rate.
marketing@alchempro.com
