A few months ago, the outlook for discounters sounded a little less than cheery, but Target (NYSE:TGT) hit the bulls'-eye today. Its 21% increase in net income was surely music to investors' ears (and much nicer music than the usual Muzak piped into the aisles of retail stores, at that).
Target reported earnings of $0.91 per share, or $832 million, as compared to $0.75 per share, or $688 million, for the same quarter the year before. Revenues enjoyed a 10.7% bump to $15.57 billion, while same-store sales gained 4.9%.
Just Tuesday, Fool Rick Munarriz pointed out that today's earnings news from Wal-Mart (NYSE:WMT), Nordstrom (NYSE:JWN), and Target would help investors gauge the mood of the consumer: discount or luxury? Or, perhaps, somewhere in between? In that arena, a cold January helped boost discounters' sales, showing that when it comes to the daily needs in the daily grind, a discount remains an attractive lure.
If possible bumps lie in the road for discounters, Fool Bill Mann recently took aim at some of them. He commented on the outlook for Wal-Mart's growth against a backdrop of continued reliance on credit, as well as increased personal bankruptcies and consumer confidence that flies in the face of continued sad employment numbers. The same potential threats wait for Target.
When it comes to public relations debacles, though, Wal-Mart's the target, while Target slips under the radar. In my recent reading, I stumbled across a BusinessWeek article that culled some reader feedback on "The Wall." The upshot? Some suggestion that shoppers stop chasing the almighty discount to the extent that they would frequent a store that's been called out for shortchanging its own employees -- on things like overtime pay and benefits -- while running mom-and-pop shops out of towns across America. Though its numbers today were good, Wal-Mart's had these image problems brewing for quite some time.
With a positive view of the future, people perceive that they have more choices in where they shop, as opposed to a year ago when many worried consumers may have seen penny-pinching as a survival tactic and not a socially responsible act. Meanwhile, Target has a hip, youthful image that doesn't bear the same amount of public scrutiny that Wal-Mart does. Maybe this is a competitive advantage that could serve Target well right now.
Talk out the differences between Target and Wal-Mart with other Fools on the Wal-Mart discussion board.
Alyce Lomax does not own shares in any of the companies mentioned.
