One month does not a trend make, but Target Corp.'s credit-card operation showed slight signs of stabilizing in February, according to regulatory reports filed Friday.
Charge-offs from uncollected credit-card bills continued to rise, but they increased at a slower pace than in recent months. And in a potentially hopeful sign for future charge-offs, the Minneapolis-based retailer saw overall delinquencies drop 2.6 percent for the month.
Still, the Minneapolis-based discount chain wrote off $94.2 million in bad credit loans in February, an annualized 12.9 percent of its total loans. That compares with 12.3 percent in January.
While double-digit write-offs don't please investors, Target's February credit numbers look much better than those at major credit card issuers J.P. Morgan Chase, Bank of America, Citibank, Discover and American Express, analyst Mark Miller of William Blair & Co. noted in a report Friday. Lumped together, those companies saw charge-offs climb twice as fast as Target's and delinquencies shoot up eight times as fast in the past two months.
Target reported that its early stage delinquencies, amounts owed by customers who are 30 days behind on their bills, dropped 8.4 percent, or $21 million, in February. The decrease likely comes from tighter credit standards and from typical credit cycles. February is a short month, but it's also far enough removed from the holiday shopping season that consumers who got into trouble may no longer be on the books.
Write-offs from bad debt in the $8.8 billion portfolio are expected to increase in the months ahead as the recession drags on and unemployment grows. Target has boosted its reserves to cover as much as $600 million in uncollectable credit-card loans for the first half of 2009.
JACKIE CROSBY
