Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, recently posted healthy sales results for the four-week period ended August 27, 2011.
The rise in comparable-store sales was in line with management’s expectation, reflecting robust sales in back-to-school and back-to-college category.
Target’s comparable-store sales for August 2011 rose 4.1%, same as the previous month and up from 1.8% growth registered in the prior-year period. Year-to-date, comparable-store sales inched up 3.1% versus an increase of 2.2% in the prior-year period.
Based in Minneapolis, Minnesota, Target announced that net retail sales for August rose 5.4% to $5,292 million from $5,023 million reported in the prior-year period. Year-to-date, sales climbed 4.1% to $36,766 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 over the long term. We expect the company to gain market share, and believe that focusing on consumable items should boost sales and earnings in a sluggish consumer environment.
Target now tends to focus more on store renovations, enhancing store sales productivity, introducing smaller format stores, and eyeing opportunities to expand in international markets.
Further, Target is also targeting markets, such as Canada and Latin America. The company plans to open 125 to 135 stores in Canada by 2013 and 2014. We believe, the openings of stores outside the United States will definitely boost the company’s top and bottom lines and improve cash flow generation capability.
The greater concentration of Target’s revenue generating capability in a few regions of the United States poses a competitive threat compared to Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), which are geographically more diversified and more resourceful.
Consequently, we prefer to have a long-term Neutral recommendation on the stock. Moreover, Target holds a Zacks #3 Rank, which translates into a short-term Hold rating.
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