Higher costs helped drive down profits from Target Corp.'s credit card business by 14.9% for the fiscal second quarter ended Aug. 1, to $63 million from $74 million during the same period a year ago. Credit card revenue totaled $500 million, down slightly from $501 million. Average gross credit card receivables funded by Target declined 21.2%, to $2.86 billion from $3.63 billion. Target sold 47% of its credit card receivables in May 2008 to JPMorgan Chase & Co. Target's charge-off rate on outstanding receivables during the quarter was 12.1%, up 450 basis points from 7.6% during the same period a year ago. The company's loan-loss provision rose 69% to $1 billion from $590 million. Finance-charge revenue for Target's credit card unit rose 10.9%, to $377 million from $340 million, while revenue from late fees and related charges fell 24.8%, to $91 million from $121 million. Third-party merchant fees fell 20%, to $32 million from $40 million. Total expenses rose 9%, to $413 million from $379 million. During a conference call today with analysts, Douglas A. Scovanner, Target executive vice president and chief financial officer, said the retailer's credit card portfolio "continues to exhibit stability" and improving yields, as the overall portfolio shrinks. Credit card issuers' tightening of credit policies is having an incremental effect on same-store sales, he added, noting credit cards account for about one-third of Target's sales. Some 6% of those sales are on Target's private-label credit card or its co-branded Visa credit card, Scovanner said. The Credit Card Accountability, Responsibility and Disclosure Act President Obama signed into law in May is "a major league headwind" for Target's credit card business this year, which he expects will "adversely impact the profitability of all card portfolios, like this one." Target's overall profit for the quarter fell 6.3%, to $594 million compared with $634 million a year ago. Total revenue was down 2.6%, to $15.07 billion from $15.47 billion.

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