Target, the popular discount store with the memorable logo, has been feeling the financial squeeze, and investors want to know how the company plans to reverse its bad fortune.
With the tough economic times affecting millions of Americans, Target has watched its own profits drop sharply. Credit cards play a huge part in Target's trouble. Fewer customers are applying for Target cards, since many families focus on one or two major credit cards rather than opening traditionally high-interest accounts with retailers. Those who do have Target cards are charging fewer purchases, especially among non-essentials. And a substantial percentage of cardholders have fallen behind or defaulted on their credit card payments altogether. In September, Target wrote off 10.1% of its debt as non-recoverable.
As bad debt increases, Target's credit card profits decrease. They've already fallen by 65% compared to last year. Like other card issuers, Target took measures to lower its risk by tightening the terms of its credit cards. Still, the cards continue to be a problematic part of the business as more people simply can't pay what they owe. Experts predict rough waters for another one to two years.
These troubles have resulted in a sharp drop in Target's shares, down 50% from last year. Shareholders are understandably concerned and interested in what Target intends to do to regain its value.
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