doodledee

Yesterday's post from Beth "Die Soccer Moms Die" Hawkins on the City Pages Blotter titled "Don't Stop Living in the Red" caught my eye. It was subtitled "Three-fourths of Target profits now from credit cards" and it opened with the following mind-blower:

Shabby Chic, indeed: […] According to a BusinessWeek analysis of Target's first-quarter 2006 earnings reports, three of every four dollars in profit made by the retailer now come from interest, late fees, over-balance fees and other earnings on its Visa cards.

It goes on to talk about how TGT is potentially lowering the standards for issuing credit cards in order to make more money from people who carry balances, miss payments, etc. I'm guessing the angle Ms. Hawkins was going for was that this giant corporation is making tons of money by exploiting people with questionable credit worthiness, but for all I know she may have just been trying to warn the investing public that TGT was taking on too much credit risk and that it might be time to sell your shares.

Either way, after I read the story all I could think was, "Whaaa?!! 75% of TGT's profit comes from credit cards?" That seemed insane. They're like a $50B company with over a thousand stores. I know the credit stuff has been kicking ass for them and everything, but holy cow I didn't realize they were making 75% of their money from interest and late fees.

So I go find the Business Week article - because naturally she didn't link to it - and here's what it said:

When Target Corp. reported its first-quarter earnings in mid-May, analysts were annoyed that the retailer missed their consensus forecast by a penny per share. But few seemed to notice that three-quarters of the company's 15% earnings gain came from its credit-card operations, not its retail business.

Ah ha! So it's not that "Three-fourths of Target profits now from credit cards", it's that three-fourths of Target's Q1 15% gain in earnings originated in the credit card side of the house. That's what we in the business like to call a BIG DIFFERENCE. Still kind of an eyebrow raiser, but not exactly the type of thing your local arts and entertainment weekly would typically get worked up about.

I tried to comment on the Blotter to correct the error, but City Pages moderates their comments and - brace yourself - my comment with the correction never got approved. That may or may not be related to the fact that I used the username 'econ101' or the fact that I probably had tons of spelling errors in my comment or the fact that they never check their moderation queue for new comments, but regardless, hipsters continue to be misinformed even as we speak. The humanity.

This story didn't deserve an entry this long. Whoops.

Don't Stop Living in the Red [citypages]
Where Target May Miss The Mark [businessweek]