Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, recently posted soft sales results for the four-week period ended November 26, 2011.
The rise in comparable store sales was near the lower end of management’s expectation as tough competition weighed upon the sales results. As per the company, although sales surged on Black Friday, the rise was not enough to boost its November sales. The company now foresees an intense competitive and promotional environment in December.
Target registered an increase of 1.8% in comparable store sales for November 2011 compared with 5.5% growth witnessed in the prior-year period. Year-to-date, comparable store sales inched up 3.2% versus a 2.4% jump in the prior-year period.
Minneapolis, Minnesota-based Target Corporation announced that net retail sales for November increased 3% to $6,191 million from $6,012 million reported in the prior-year period. Year-to-date, sales increased 4.3% to $53,720 million.
Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy and new merchandise assortments, should help 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 in order to entice customers is also providing an additional benefit of free shipping for any e-shopping to its cardholders, who are already getting a discount of 5% for the purchases they made.
Target now tends to focus more on store renovations, enhancing store sales productivity while introducing smaller store formats, and eyeing opportunities to open stores in international markets.
Target’s greater concentration on revenue generating capability in United States’ few regions, poses a competitive threat as compared to more geographically diversified and resourceful companies – Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST),
Consequently, we prefer to have a long-term ‘Neutral’ rating on the stock. However, Target holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation
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