Profits dropped almost 8 percent at Target Corp. on softer-than-expected sales and higher costs, but the discount retailer still beat Wall Street earnings estimate for its first quarter.

The nation’s second-largest discount retailer on Tuesday reported a profit of $602 million, or 74 cents per share, in the three months ended May 3, down from $651 million, or 75 cents per share, during the same period last year.

Analysts surveyed by Thomson Financial expected 71 cents per share.

Minneapolis-based Target said revenue rose 5 percent to $14.8 billion from $14 billion. Analysts predicted $14.92 billion.

Its shares rose 20 cents to $55.12 in morning trading.

President and Chief Executive Gregg Steinhafel said in a statement that the profit “met our expectations despite softer-than-expected sales performance.” He added that “the current economic environment remains challenging.”

The company said profit margins declined slightly from last year because sales grew faster in low-margin categories, which generally includes food and essentials like paper towels.

Sales at established stores fell 0.7 percent. Retail profits not counting interest and taxes fell 2 percent to $959 million.

In its credit card operation, Target said it earned $199 million before interest and taxes, down almost 10 percent from a year ago.

Net credit card write-offs increased to an annualized rate of 7.6 percent, versus 6 percent a year ago. It wrote off $161 million in bad debts, up almost 62 percent from a year ago.

Target said it closed its transaction to sell 47 percent of its credit card receivables to JPMorgan Chase on Monday, for $3.6 billion.

The company runs 1,613 Target stores in 47 states.

___

AP Business Writer Lauren Shepherd in New York contributed to this report.