Target Corporation (TGT) recently posted sluggish sales for the five-week period ended April 2, 2011 due to a shift in Easter holiday to April 24 this year from April 4 in the previous year.
The company’s comparable-store sales dropped 5.5% for March 2011, following an increase of 1.8% in February 2011. The comparable-store sales also remained well below the 10.3% growth rate registered in March 2010. Year-to-date comparable-store sales tumbled 2.4% versus a jump of 6.8% experienced in the prior-year period.
However, Target remains optimistic about the upcoming Easter season, and reiterated a mid-teens growth in comparable-store sales for the month of April.
Category wise – grocery, electronics, healthcare and beauty, and other household necessities — reported healthy sales. However, hardlines sales fell with sluggish performance experienced across music, movies and books. Comparable-store sales of apparel and shoes remained soft.
Geographically – comparable-store sales were healthier in the upper Midwest, Northern and Southern California and Florida. However, sales in Northeast Michigan, Ohio and the Southwest remained soft.
Based in Minneapolis, Minnesota, Target announced that net retail sales for March slipped 4.5% to $5,955 million from $6,233 reported in the prior-year period. Year-to-date sales fell 1.5% to $10,705 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. However, with the revival of the economy, the other merchandise categories are also gaining strength.
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 the 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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