Target profit helped by low credit card write-offs

Sales rose 2.8 percent to $20.28 billion, while sales at its established stores rose 2.4 percent, outperforming its larger rival Wal-Mart Stores Inc , which said on Wednesday that its U.S. same-store sales fell 1.8 percent over the holiday quarter.

Target, which operates 1,750 big box discount stores in the United States, got a big lift from its credit card business. Target said that business generated a profit of $151 million, nearly four times more than last year, as consumers' improving finances helped it reduce its bad debt expense by 71 percent.

The U.S. discount chain earned net income of $1.04 billion, or $1.45 per share, in the fourth quarter ended January 29, compared with $936 million, or $1.24 per share, a year earlier.

Excluding items, Target's profit was $1.38, just under the $1.40 Wall Street analysts were expecting, according to Thomson Reuters I/B/E/S.

Target said its gross margin fell 0.4 percentage point to 28.7 percent, citing the impact of the 5 percent discounts it offers on its private label credit cards and its PFresh concept, which offers a wider selection of fresh food and groceries in its general merchandise stores.

Shares were down 26 cents from their close on Wednesday of $50.26.

(Reporting by Phil Wahba in New York. Additional reporting by Brad Dorfman and Jessica Wohl in Chicago; Editing by Lisa Von Ahn, Dave Zimmerman)