Target's Aim Is True

I have a tip for analysts gunning for the center of Target's (NYSE:TGT) bull's-eye logo: Aim higher. The discount retailer once again lapped Wall Street's quarterly predictions.

Target saw its bottom line soar by 50% to hit $0.61 a share, two cents ahead of analyst projections. Market mavens also came up two pennies short in trying to nail the April quarter. Revenues rose by 13.6%, to $12 billion for the period.

The key to Target's success is as easy as eyeing the comps. They rose 6.7% for the June quarter, an improvement over March's robust 6.2% uptick in same-store sales. Rival Wal-Mart (NYSE:WMT) may be bigger, but it's not growing as quickly at the store level. Over the same six months, Wal-Mart's comps have grown by a more modest 3.9%.

Discounters like Target, Wal-Mart, and even Sears Holdings' (NASDAQ:SHLD) Kmart have been steady performers in recent years. They truly are the all-weather players. When times are tight, they woo the penny-pinchers. When the going is good, it means more disposable income for the perpetually thrifty.

Target's been a darling over the years thanks to its "cheap chic" strategy. Wal-Mart's too well-oiled a machine to compete against on price, so Target has gone for style points -- and it's worked perfectly.

Target hasn't tried to score Wal-Mart customers hungry for an upgrade. Instead, it's been gunning for Gap (NYSE:GPS) and Limited (NYSE:LTD) shoppers looking to save some coin. The company has contracted with prolific designers throughout its store categories.

Target's been doing plenty of things right these days. It's also eating its own cooking. The company is engaged in an aggressive $3 billion share-buyback program. At a time when way too many companies are diluting investors' holdings, Target's fully diluted outstanding shares have shrunk by 3% over the past year. Every shareholder owns a slightly bigger piece of the company today than a year ago.

My wife was talking to a colleague about a recent trip to Target when a third person had to interject. "Oh, you mean Paradise," she said.

They laughed. It certainly beats the tired Tar-Zhay moniker. Yet investors might find little to laugh at -- to them, Target may very well be Paradise. With steady, market-thumping results and all-weather luster, does it get any better?

A shopping list of related Foolishness:

• The company's April quarter was also a pleasant one.
• Target looks to be cashing in on Wal-Mart's summer of love.
• See what it takes to predict the next Wal-Mart.

Longtime Fool contributor Rick Munarriz spends a fair deal of time at area Target stores. Just don't call him a cheapskate. He does not own shares in any companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.