Target Reports Soft Sales

Target Corporation ( TGT - Analyst Report ) posted soft sales results for the five-week period ended June 30, 2012. Target, the operator of general merchandise and food discount stores in the United States, registered an increase of 2.1% in comparable store sales for June 2012, driven by a rise in average transaction.

However, sales were well below an increase of 4.5% marked in June 2011. In terms of performance, Target also lagged its peer, Costco Wholesale Corporation ( COST - Analyst Report ) , which witnessed an increase of 3% in comparable store sales during the period under review.

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

Category wise, Target reported solid sales in Food, with health and beauty increasing in mid-single-digit. Apparel sales marked an increase of low-single-digit, while sales of hardlines and home witnessed a downfall. Alongside, the company registered rise in sales in every region.

Minneapolis, Minnesota-based Target Corporation announced that net retail sales for June increased 2.6% to $6.4 billion from $6.3 billion reported in the year-ago period.

Year-to-date, Target registered a 4.4% increase in comparable store sales with a 5.1% rise in net retail sales to $28 billion.

Going forward, the company stood by its earlier guidance and expects adjusted second-quarter 2012 earnings between $1.04 and $1.14 per share. Management also projected comparable-store sales growth of 3% in the U.S. retail segment.

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

Currently, Target holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation. However, considering the fundamentals, we have a long-term ‘Neutral’ rating on the stock.