Target Reports Healthy Sales

Driven by a rise in average transaction size coupled with increased comparable store transactions, Target Corporation ( TGT - Analyst Report ) posted healthy sales results for the four-week period ended May 26, 2012.

Target, the operator of general merchandise and food discount stores in the United States, registered an increase of 4.4% in comparable store sales for May 2012, compared to a 2.8% increase in May 2011. In terms of performance, target exceeded its peer, Costco Wholesale Corporation ( COST - Analyst Report ) , which witnessed an increase of 4% in comparable store sales during the period under review.

Management noted that the company’s May sales were at the higher end of its expected growth range.

Category wise, the company reported solid comparable store sales in Food, with apparel and health and beauty showing above average growth. However, sales of hardlines and home decreased marginally. Alongside, the company witnessed increased sales in every region.

Minneapolis, Minnesota-based Target Corporation announced that net retail sales for May increased 5% to $5 billion from $4.8 billion reported in the year-ago period.

Year-to-date, Target registered a 5.1% increase in comparable store sales with a 5.9% rise in net retail sales to $21.6 billion.

Going forward, Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy, and new merchandise assortments, are expected to drive comparable-store sales and operating margins in the long term.

Moreover, the company’s P-fresh remodel program, 5% REDcard Rewards program, City Target stores, The Shops at Target initiatives and foreign ventures provide a safeguard from any unprecedented events.

Currently, Target holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation. Considering the fundamentals, we have a long-term ‘Neutral’ rating on the stock.