Target Reports Soft Sales

Target Corporation (TGT - Analyst Report) posted soft sales results for the five-week period ended September 29, 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 September 2012, driven by a rise in average transaction size along with a marginal increase in comparable store transactions.

However, sales were well below an increase of 5.3% marked in September 2011. In terms of performance, Target also lagged its peer, Costco Wholesale Corporation (COST - Analyst Report), which witnessed an augmentation of 6% in comparable store sales during the period under review.

The rise in comparable-store sales was in-line with management’s expectation, reflecting robust sales in Food category.

Category wise, Target reported solid sales in Food, with health and beauty increasing in mid-single-digit. The company stated that sales in home category marked a marginal rise, while apparel and hardlines witnessed a downfall. Alongside, the company registered escalated sales in every region.

Minneapolis, Minnesota-based Target Corporation announced that net retail sales for September elevated 2.6% to $6.08 billion from $5.92 billion reported in the year-ago period.

Year-to-date, Target registered a 3.9% increase in comparable store sales with a 4.5% rise in net retail sales to $44.61 billion.

Going forward, the company expects fiscal third quarter 2012 adjusted earnings in the range of 83 cents to 93 cents a share. The current Zacks Consensus Estimate for the third quarter of 2012 is 77 cents, representing a year-over-year decline of 6.4%. Moreover, the company expects comparable store sales to increase in the low to mid single-digit in October 2012.

In addition, the company announced that it will not report its monthly sales results from the start of fiscal 2013.

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