Amidst the sluggish economic environment, cautious consumer
spending and intense competition,
), the operator of general merchandise and food discount stores in
the United States, has maintained positive sales momentum so far in
2012, and we believe it will sustain the same tempo for the
remainder of the year.
Riding Positive Comps
During the period from January to July 2012, Target consistently
registered comparable-store sales growth. In that period, comps
growth touched a low of 1.1% and hit a high of 7.3%, recording
average growth of approximately 4.2%. In the first seven months of
2012, comps increased 4.3% in January, 7% in February, 7.3% in
March, 1.1% in April, 4.4% in May, 2.1% in June and 3.1% in
Given an uneven economic recovery, monthly sales data for Target
portrays a decent performance. From January to July of this year,
the company registered minimum sales growth of 2.1% and maximum
growth of 8%, reflecting average growth of approximately 4.8% for
the period. It registered sales growth of 5.1% in January, 8% in
February, 7.9% in March, 2.1% in April, 5% in May, 2.6% in June and
3.2% in July.
Target's relentless endeavors to keep itself on a growth
trajectory have paid off despite a difficult consumer environment.
The company's P-fresh remodel program, 5% REDcard Rewards program,
City Target stores, The Shops at Target initiatives and its foray
into foreign markets have all helped to drive solid top-line growth
Target's efficient marketing, multi-channel strategy, product
innovation, compelling pricing strategy, and new merchandise
assortments should drive comparable-store sales and operating
margins in the long term. We expect the company to gain market
share, and believe that more focus on consumable items should boost
sales and earnings in a sluggish consumer environment. The
company's long-term objective is to attain $100 billion or more in
sales and $8.00 or more in earnings per share by 2017.
The economy has not yet recovered fully. It is evident that the
company's customers remain sensitive to macroeconomic factors
including increases in fuel and energy costs, credit availability,
unemployment levels, and high household debt levels, which may
affect their discretionary spending, and in turn curtail the
company's growth and profitability.
Moreover, a greater concentration of the company's revenue
generating capabilities in limited regions of the United States
poses a competitive threat to Target, compared with
Wal-Mart Stores Inc.
Costco Wholesale Corporation
), which are more geographically diverse.
Consequently, Target is focusing more on store renovations and
improving store sales productivity. Further, with the ever-changing
consumer preferences, the company feels the need to adapt to the
demands of time and consider consumer-oriented strategies.
Currently, we maintain our long-term "Neutral" recommendation on
the stock. However, Target retains a Zacks #2 Rank that translates
into a short-term "Buy" rating.
The company delivered quarterly earnings of $1.06 per share that
rose 3.4% from $1.03 earned in the prior-year quarter, and also
came in ahead of the Zacks Consensus Estimate of $1.01. However,
excluding costs related to Canadian operations, earnings from its
U.S. operations came in at $1.12 per share, up 4.6% from $1.07
posted in the year-ago quarter.
Target now projects adjusted third-quarter 2012 earnings between
83 cents and 93 cents a share. For fiscal 2012, earnings are
expected to be in the range of $4.65 to $4.85 per share, up from
$4.60 to $4.80 forecasted earlier.
On a GAAP basis, including expenses related to the company's
entry in the Canadian market, management projected earnings between
69 cents and 79 cents for the third quarter and between $4.20 and
$4.40 per share for fiscal 2012, up from $4.10 and $4.30 projected
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