Lots of Love for Target

Target (NYSE: TGT  ) hit the bulls-eye once again. What's not to love?

Fourth-quarter net income increased 19% to $1.12 billion, or $1.29 per share, but bear in mind that Target's results included an extra week compared to last year. Earnings did defeat analysts' expectations, though, as Target benefited from the holiday season included in the fourth quarter.

Target's revenues increased 16.3% to $19.7 billion. Again, that figure included an extra week, and Target reported a 4.8% increase in same-store sales for the quarter. Significantly, Target's credit card operations continue to bolster its business, posting a 17% increase in revenue to $441 million. Inventory increased just 7%, which is good news, too, since retail watchers never like to see inventory increase more quickly than sales.

Drilling down a bit deeper, though, we find that Target generated $934 million in free cash flow, which is down 12% from the $1.06 billion in free cash flow it generated last year. Cash and equivalents decreased 51% to $813 million, although it's worthwhile to note that Target has been repurchasing shares and paying down debt.

It's a good thing Target had a strong showing -- last quarter, Wal-Mart (NYSE: WMT  ) defied logic by reporting a strong quarter and year, despite its larger size and well-publicized challenges.

Target's one of my personal favorites, though it faces considerable competition from Wal-Mart, Costco (Nasdaq: COST  ) , and any other retailer offering inexpensive goods (or not-so-inexpensive goods, for that matter). Target's hip fashion appeal gives many retailers a run for their money, attracting a diverse array of shoppers. Wal-Mart's notably had trouble emulating Target's success with "cheap chic" fashions.

I can understand why investors are celebrating Target today, given its strong quarter, continued competitive strengths, and room for even greater growth. I also believe that Target's well-positioned for the long term. On the other hand, I'd consider it sensible to wait for a cheaper price before taking stock in Target.

Here's some related Foolishness for anybody who's shopping around for more:

• Wal-Mart defied logic last quarter.
• Target has a new bulls-eye.
• Revisit last quarter at Target.

Costco is a Motley Fool Stock Advisor recommendation. Wal-Mart has been recommended by Motley Fool Inside Value. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned.