Target Corp. is projecting a merry holiday as the discounter counts on a 5 percent discount for its credit and debit card customers and its storewide remodeling

The upbeat report comes as Target reported a 22.6 percent increase in third-quarter net income, helped by improvements in its credit card business and expansion into food.

The cheap chic discounter said it expects a key revenue measure to rise more sharply than it has in any period in the last three years as it reaps the benefits of its new 5 percent discount offer for those buying with its branded credit card or debit cards. The store remodels feature an expansion of fresh food as well as brighter lighting in cosmetics and better shoe displays.

The projection means fourth-quarter revenue at stores open at least a year would top the 2.8 percent increase seen in the first quarter. Target also said it expects the holiday quarter's profits to match Wall Street estimates.

The report follows Wal-Mart's third-quarter results, released Tuesday, which showed its sixth consecutive quarter of declines in revenue at stores open at least a year.

Target's shares rose $2.08, almost 4 percent to $55.62. But Wal-Mart's shares slipped 49 cents to $53.77 a day after it issued a holiday forecast that wasn't quite so bullish. Wal-Mart says it expects its holiday sales will increase, but many analysts say it might be a stretch given so much stiff competition, including from dollar stores.

"While consumers remain conservative in their purchasing behavior, we're encouraged by recent signs in the broader economy that may signal somewhat stronger and more stable sales in the coming months," said Gregg Steinhafel, chairman, president and CEO of Target Corp. in address to investors on Wednesday. "While some current signals are more positive, we continue to plan our business cautiously."

Like many of its competitors, Target is using aggressive deals to draw in shoppers this holiday season. Target announced its most aggressive shipping offer ever, which covers 800,000 items when its online shoppers spend $50 or more. The deal is from Nov. 21 to Dec. 11.

Target posted net income of $535 million, or 74 cents per share, in the quarter ended Oct. 30. That compares with $436 million, or 58 cents per share in the year-ago period.

Revenue rose 2.2 percent to $15.61 billion.

Analysts surveyed by Thomson Reuters forecast earnings of 68 cents per share on revenue of $15.61 billion.

Within its credit card segment, profit increased to $130 million from $60 million a year ago, as bad debt expense declined 64 percent to $110 million from $301 million in same period last year.

At Target's retail segment, revenue increased 3 percent to $15.2 billion, partly because of a 1.6 percent increase in revenue at stores open at least a year. The measure is considered a key indicator of a retailer's health because it excludes the effects of stores that open or close during the year.

Steinhafel said that so far its 5 percent discount offer, launched Oct. 17, is "being enthusiastically embraced." Chief Financial Officer Doug Scovanner told investors that revenue at stores opened at least a year have risen in the midsingle digits for the first two weeks of the month. For the holiday quarter, he expects the measure to be up anywhere from 2 percent to 4 percent.

Kathee Tesija, Target's executive vice president of merchandising, said Target is benefiting from shoppers trading down to the discounter for discretionary items like clothing and beauty products. Home furnishings is still challenging as it is more discretionary than clothing, she said. But items related to cooking and food preparation have been strong as shoppers stay home to cook. Deep discounting on TVs amid a glut has helped fuel sales, they said.

That translated to the average customer's total purchase shrinking 0.5 percent, but more customers came into its stores, fueling a 2.1 percent increase in transactions. Selling price per item fell 3.3 percent.

Target said that meeting Wall Street's fourth-quarter earnings estimate of $1.38 per share is reasonable.