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Target, BJ's top 4Q marks
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March 6, 2001: 1:21 p.m. ET
Discount chains hold their own in a sluggish retail environment
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NEW YORK (CNNfn) - Two major retailers, Target Corp. and BJ's Wholesale Club, reported slightly better-than-expected earnings Tuesday, reflecting consumers' shift to discount chains and bulk price clubs as their confidence ebbs in a slowing economy.
Target Corp. (TGT: Research, Estimates) reported fourth-quarter earnings of $552 million, or 61 cents a share excluding unusual items, compared with earnings of $522 million, or 56 cents a share, a year earlier. That's 2 cents better than the 59 cents a share analysts forecast, according to earnings tracker First Call.
Sales for the company -- whose stores include Target, Dayton's and Marshall Field's -- increased to $12.2 billion from $10.8 billion a year earlier.
 Separately, Target said it agreed to acquire the rights to 35 former Montgomery Ward stores, which it plans to convert to Target stores by 2002. On Dec. 28, Ward filed for Chapter 11 bankruptcy protection, a victim of declining sales and a weaker retail environment.
BJ's Wholesale Club Inc. (BJ: Research, Estimates), reported fourth-quarter net income of $54.8 million, or 74 cents a share, up from $47.7 million, or 63 cents a share, a year earlier. Analysts on average had expected a profit of 73 cents a share, according to First Call.
Sales of food and women's apparel helped boost the Natick, Mass.-based company's earnings.
Total sales in the quarter increased 18 percent from a year earlier. Sales at stores open at least a year, a closely watched figure known as same-store sales, were up 3.2 percent.
Target shares gained $2.10 to $38.50 in Tuesday afternoon trading. BJ's shares climbed $1.22 to $46.22.
The earnings news comes a day before most of the nation's biggest retailers report February sales results. Some analysts are expecting modest sales growth for the month, which is typical for the period as stores continue to offer big inventory-clearing sales to make room for spring and summer items.
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However, many analysts have said they expect a sluggish retail environment fueled by a slowing economy and decreased consumer spending, to last at least throught the first half of the year.
As the economy slows and companies lay off more employees, discount chains such as Target, Wal-Mart Stores (WMT: Research, Estimates) and Kmart (KM: Research, Estimates) tend to benefit, but not as much as might be expected. In tough times, more consumers go bargain hunting at discount chains, yet that new traffic is offset by lower to middle-income customers who regularly shop those stores as they cut back on spending altogether, said Kurt Barnard, president of Barnard's Retail Trend Report in Upper Montclair, N.J.
"In times of economic constraints such companies like Target, or BJ's or Costco, Wal-Mart and Kmart are likely to find they are going to gain more market share from department stores and specialty stores than in other times," Barnard said. "However, while they are gaining market share from above, they will find that their more traditional customers are buying a little less or less often."
In other retailing news, electronics chain Circuit City Group (CC: Research, Estimates) reported an 11 percent decline in fourth-quarter sales and said it likely will meet 2002 earnings forecasts.
Office retailers Staples Inc. (SPLS: Research, Estimates) and OfficeMax Inc. (OMX: Research, Estimates) also beat expectations, though both were hurt by the slowing economy. 
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