Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, recently posted sales results for the four-week period ended April 30, 2011.
The company’s comparable-store sales jumped 13.1% for April 2011, following a decline of 5.5% in March 2011. The comparable-store sales also remained substantially higher compared to the 5.9 % drop witnessed in April 2010. Year-to-date comparable-store sales climbed 2% versus an increase of 2.8% experienced in the prior-year period.
Although, the company delivered a double-digit increase in comparable-store sales benefiting from the shift of Easter holiday to April 24 this year from April 4 in the previous year but it remained below management’s expectation as consumers remain cautious on their spending on account of gasoline and commodity inflation.
Category wise, grocery and apparel for children reported healthy sales. However, sales remain sluggish across jewelry, electronics and home decor.
Based in Minneapolis, Minnesota, Target announced that net retail sales for April soared 13.7% to $4,874 million from $4,288 million reported in the prior-year period. Year-to-date sales rose 2.8% to $15,580 million.
Target’s strategic initiatives such as REDcard Rewards program and P-fresh in-store food and grocery sections should help drive comparable-store sales and operating margins in the long term. We believe that increased focus on consumable items will boost sales in a sluggish retail environment.
The company is also managing its costs effectively, resulting in margin improvement and bottom-line growth. Target now tends to focus more on store renovations and enhancing store sales productivity, introducing smaller format stores and opportunities to open stores in international markets. However, unfavorable consumer spending pattern and increased competition still remain concerns.
Target, which currently operates 1,755 stores in 49 states, faces stiff competition from Wal-Mart Stores Inc. (WMT). Currently, we have a long-term ‘Neutral’ rating on the stock. Moreover, Target holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation.
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