Tags: Target | TGT | store | retail | retailer | sales

Target: A Look at a Bull's-Eye Stock

By    |   Friday, 06 May 2011 03:39 PM

Target Corp. (TGT) is the nation’s second-biggest discount retailer. Its stock is on sale, just like so many items in the company’s stores. The share price is down by double digits over the past 12 months.

The company’s performance, however, doesn’t suggest that the stock should be trading at a discount.

In February, Target announced that annual sales may exceed $100 billion by 2018, up about half from the 2010 total of $67.39 billion. It said earnings per share may double during that period.

Target plans to open its first stores in Canada by 2013. That move, along with its new rewards program and an increase in its fresh food offerings, could help the company surmount a “persistently weak” U.S. discount market, Chief Financial Officer Douglas Scovanner said in a conference call after the company released fourth-quarter earnings.

“We’re confident that the two sales-building strategies that we launched, Pfresh (Target’s new grocery area) and 5 percent rewards, are working as advertised,” he said.

Target reported profit of $1.04 billion in the fourth quarter, up 11 percent from $936 million a year earlier. Sales rose 2.8 percent to $20.28 billion.

Target’s same-store sales may rise up to 5 percent for 2011, improving on last year’s 2.1 percent increase, the company forecasts. Earnings per share may climb 10 percent.

Target’s credit card operations are going great guns, too, as U.S. consumers continue to clean up their balance sheets. That business produced a profit of $151 million in the fourth quarter, almost four times more than a year earlier.

Getting ahead of recovery

Standard & Poor’s analyst Jason Asaeda has a four-star buy rating on the stock, thanks to its low valuation.

“While we anticipate a slow and uneven economic recovery, we look for TGT to accelerate same-store sales growth, supported by higher traffic and cross-shopping of categories the company is seeing in new and remodeled Pfresh stores,” he writes.

Apparel and beauty product sales also will help, as will the company’s rewards program, Asaeda says.

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Target Corp. (TGT) is the nation s second-biggest discount retailer. Its stock is on sale, just like so many items in the company s stores. The share price is down by double digits over the past 12 months. The company s performance, however, doesn t suggest that the stock...
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Friday, 06 May 2011 03:39 PM
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