Target rebounds in third quarter on solid sales

Target reported a 3.2 percent rise in its third-quarter profit, beating Wall Street expectations as shoppers spent more on beauty products and back-to-school fashions.

The results, which included its first increase in a key revenue measure in a year, are encouraging as the discount retailer gears up for the official start of the holiday shopping season, which kicks off next weekend. Last year, Target had a solid start to the shopping season but a data breach disclosed a week before Christmas sent customers fleeing for months and hurt sales and profits.

Shares rose almost 5 percent on the news in morning trading Wednesday.

The data theft, which compromised millions of credit and debit cards, was a major factor in the ousting of CEO Gregg Steinhafel in May. Former PepsiCo executive Brian Cornell took over in August, and has the task of keeping the momentum going and reclaiming the retailer's image as a purveyor of cheap chic fashions and home decor.

Cornell must also salvage Target's botched entry into Canada in 2013, which has been a big drag on profits.

Target is playing catch-up, particularly with Amazon.com, and has put into place a service that allows people to order online and pick up goods at a store. It is also cutting shipping time by using its network of stores to accommodate online shopping.

Like many retailers catering to middle income shoppers, Target is wrestling with a customer who is still not benefiting from a recovering economy and is struggling with stagnant wages.

"Overall, we were pleased with the third-quarter performance," John Mulligan, Target's chief financial officer,told reporters in a conference call following the release of the results. But he added, "We recognize we still have a lot of work to do as we continue to heal the U.S. business."