Discount retailer Target Corporation has surprised the market with a 4.5% fall in third quarter profit on weaker sales of higher margin products such as apparel and home goods.

The Minneapolis-based retailer said net earnings slipped to $483m, or $0.56 per share, from $506m, or 59 cents per share, in the same period last year.

Total revenues rose 9.3% to $14.835bn from $13.570bn. This reflects a 3.7% increase in comparable-store sales combined with the contribution from new stores and credit card operations, the company said.

The company's credit card operations contributed $157m to third quarter earnings before taxes, an increase of $23m, or 17.1%, from the same period in 2006.

Bob Ulrich, chairman and chief executive officer, said earnings were "disappointing due to soft sales in our higher margin categories, leading to lower-than-expected gross margin in our core retail operations."

But he added: "We have not observed any meaningful change in the intensity of the competitive environment and continue to believe that we are well-positioned to operate in a variety of sales environments going forward."

The company also announced that its board has authorised a new $10bn plan to buy back more than 20% of its outstanding shares. 

At the end of the quarter, the company operated 1,591 Target stores in 47 states.