Target Corporation (NYSE:
TGT) is scheduled to report its Q1 2010 results after the market closes on May 17, 2010. April sales are firm, with March sales momentum carried into the early weeks of April. The female consumer has returned, shopping with less discipline (e.g. buying items not on lists or coupons), particularly in the apparel and home categories. To this end, TGT's exclusive Liberty of London launch has exceeded expectations and combines with a continued favorable response from the private brand Up and Up and P-Fresh remodels to propel additional trips and increased spend from core customers.
Target Corporation operates large-store general merchandise formats, including discount stores, moderate-priced promotional and traditional department stores. They provide exceptional value to consumers through multiple retail formats ranging from upscale discount and moderate-priced to full-service department stores under the following names: Target, Mervyn''s California, Dayton''s, Marshall Field's, and Hudson''s.
As for Q4 2009, TGT reported net earnings of $936 million, compared with $609 million in the quarter ended January 31, 2009. EPS in Q4 increased 53.3% to $1.24 from 81 cents in the same period a year ago. On a full year basis, earnings per share were $3.30, a 15.2% increase from $2.86 in 2008. All EPS figures refer to diluted earnings per share. Sales increased 3.7% in Q4 to $19.7 billion in 2009 from $19.0 billion in 2008, due to the contribution from new stores and a 0.6% increase in comparable-store sales. Retail segment's EBIT was $1,560 million in the Q4 of 2009, an increase of 24.7% from $1,251 million in 2008. Q4 gross margin rate increased 1.8 percentage points to 29.1%, driven by rate improvement within categories slightly offset by the impact of faster sales growth in non-discretionary, lower margin-rate categories. Q4 average receivables decreased 10.2% to $8.1 billion in 2009 from $9.1 billion in 2008. In Q4, under the share repurchase program originally announced in November 2007 and resumed in January 2010, the Company repurchased approximately 8.3 million shares of its common stock at an average price of $50.74, for a total investment of $423 million.
Analysts' estimates for Q1 2010 range from a low of $0.73 to a high of $0.90, compared to a consensus estimate of $0.85, with number of estimates being 22 and the co-efficient variance -4.67. Upside in Q1 2010 EPS of $0.86 should be mainly driven by a relatively equal contribution from (1) sales above plan, (2) better-than-expected sales mix as discretionary categories outperformed consumables, and (3) a significant sequential improvement in the credit segment's performance. The credit segment is expected to experience improving receivable quality, a sharp decline in early stage delinquencies, and rising payment rates in this quarter. SGandA fixed cost hurdle rate to likely remain low at only 1.0%-2.0%. P-Fresh remodels to provide a 50 bp top-line benefit (company-wide) in 1H and a 150 bp boost in 2H as the latest waves of remodels
(6 waves over the first 9 months of 2010), including ~75 stores opened 2 weeks ago, have started much better than expected. TGT expects to open ~13 new stores this year, 20-30 in FY11, and potentially 10 incremental stores in FY12.
The stock closed at $56.67, up 4.36% on May 10, 2010 and most analysts' rate the stock as a relative Overweight with an average price target of $64.00.
