Target Earnings Under Pressure, But REDcard Debit Base Growing

by Mercator Advisory Group 0

Target Corp. announced its second quarter earnings yesterday, and similar to the results reported Wal-Mart the previous week, the retail sector remains soft due to contractions in consumer spend overall. However, the transcript of Target’s earnings call reveals the following:

Year-over-year penetration of sales in our proprietary debit and credit cards were nearly 600 basis points in the second quarter, and for the first time in our history, debit penetration moved beyond credit. The debit card has proven to be the engine that has propelled REDcard rewards beyond our initial stretch goals.

Looking at Target’s 2012 annual report, it reports household essentials (which includes pharmacy, and food and pet supplies represent 45% of their total sales. In 2012, total reported sales were just over $71.9 billion, which means that about $32.35 billion were sales of everyday items. We don’t know how much of that money was actually spent using a REDcard, but its penetration rate is somewhere between 17%-20% and growing. This data takes on an interesting new aspect, if one considers it in light of the Merchant Customer Exchange initiative, since we would assume Target would use the mobile platform to shift even more transaction activity away from network-branded cards to their proprietary payment type.

Click here to read more from CNBC.

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