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MINNEAPOLIS-Target is weathering the retail storm, reporting a drop in earnings to $602 million for the first quarter ended May 3, as compared with $651 million in Q1 2007; and a 0.7% decrease in same-store sales. Executives said during a conference call Tuesday that shoppers are buying cheaper goods, seeking value rather than splurging. However, the company is continuing with plans to add about 100 new stores a year.

The company has been predicting that the rest of the year will trend better compared to 2007, said Douglas Scovanner, EVP and CFO, during the call. However, in light of the recent quarter report, he said the company is adopting a more conservative approach and not predicting growth until some semblance of economic stability returns.

Gregg Steinhafel, president, said consumers are reducing spending in discretionary categories, especially in home furnishings and apparel. “For example, in our seasonal business…we’re seeing very robust growth in replacement business like seating and cushions and some of the accessory categories, but we’re not doing well in sets,” he said. One way to get the attention of the consumer has been to change the circulars to focus on the value and pricing mark-downs, he said during the call.

The company has 1,613 stores in 47 states, and plans to open 43 new stores in July. “Unless this slowdown in consumer spending is protracted and goes on for some length of time, we remain committed to the growth levels that we have described in the past,” Steinhafel said.

One benefit to the firm, he said, was the recent sale of an undivided interest in about 47% of its credit card receivables to JPMorgan Chase for $3.6 billion. The deal will give the company liquidity to implement business plans without the need to access term debt capital markets, said company officials. The company’s stock was down 30 cents on the day to $54.29 at the close.

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