The decline, however, was much smaller than analysts had estimated, sending its shares up by 5.1% in pre-market trading. Net income dropped to $594 million, or 79 cents a share, from $634 million, or 82 cents, a year earlier, the Minneapolis-based retailer said. Target (TGT 43.50, +2.12, +5.12%) was estimated to earn 66 cents a share, according to the average estimate of analysts surveyed by FactSet. "Second quarter earnings were stronger than expected due to very strong operating margin in our retail segment, and credit card segment performance in line with expectations," said Gregg Steinhafel, Target chief executive, in a statement. Total revenue including credit card contribution in the quarter ended Aug. 1 fell 2.6% to $15.1 billion. Retail sales fell 2.7% to $14.6 billion. Comparable-store sales dropped 6.2%. Gross margin widened to 31.9% from 31.2%. Quarter-end credit card receivables fell 4% to $349 million as the portfolio showed improvement, Target said. Target has launched a new broadcast campaign to better highlight the value part of its "Expect More. Pay Less." tagline to lure budget-conscious shoppers and to better compete against larger rival Wal-Mart Stores Inc. (WMT 51.90, +0.33, +0.64%) . It's also begun testing "low price promise" in markets including Denver and Orlando to allow stores to match advertised prices from competitors on identical items in local markets. Analysts said Target has been hurt by shoppers' perception that its products cost more than at Wal-Mart. On the merchandise front, Target has introduced a private-label line of household products called Up & Up and continues to roll out exclusive tie-ups including the upcoming apparel collection created by designer Anna Sui. Target also has been testing adding fresh foods and groceries in its non-Super Target stores to help drive store traffic.

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