Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, recently posted better-than-expected sales results for the four-week period ended July 30, 2011.
The rise in comparable-store sales was at the high end of management’s expectation, reflecting strong sales in grocery category coupled with sales growth in health and beauty products. Besides, management hinted that back-to-school sales remained robust.
The company’s comparable-store sales jumped 4.1% for July 2011, following an increase of 4.5% in June 2011, compared with a growth of 2% in July 2010. Year-to-date comparable-store sales moved up 2.9% versus an increase of 2.2% in the prior-year period.
Based in Minneapolis, Minnesota, Target announced that net retail sales for July rose 5.6% to $4,840 million from $4,585 million reported in the prior-year period. Year-to-date, sales climbed 3.9% to $31,475 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 consumables 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 while 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 matters of concern.
Target, which currently operates 1,762 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.