Another weekend looms. What to do, what to do? Here on the East Coast, the forecast calls for rain, so a lot of us will probably head for indoor entertainment -- the great American pastime of shopping. And where better to shop than the Mecca for trendy and cost-conscious buyers alike, Target (NYSE:TGT)? You've got one last chance to make an eyewitness checkup on the company's health before earnings come out on Monday. Make the most of it.
What analysts say:
- Buy, sell, or waffle? Twenty-five analysts follow Target. Seventeen of them rate the stock a buy, and the other eight a hold.
- Revenues. Analysts are looking for a 12% rise in Q1 2006 sales to $12.8 billion.
- Earnings. Profits are predicted to outpace sales, rising 14% to $0.63 per share.
What management says:
You may have missed some recent news events, since Target didn't file the releases with the SEC as an 8-K. For example, on May 4, Target announced that it missed analyst sales estimates for the quarter. Target reported $12.5 billion in Q1 2006 sales -- still close to a 12% rise, but not quite what Wall Street was expecting. You'll also see that despite the disappointing quarter, things have been improving at Target since. Combined March/April sales growth exceeded 12%, and April sales alone soared more than 17%. Same-store sales are also on the rise, with April's 10% growth more than doubling the 5% posted in Q1. But for May, the company expects sales growth to slow a bit, for an increase of only 4%-6%.
What management does:
Target's also been doing well on the profitability front. Rolling gross margins have improved 90 basis points over the last 18 months. Expect to see that begin to reverse as more recent results start weighing on the rolling tally, though. Over the last six months, Target's sales have continued chugging along at a healthy 11% clip, but cost of goods sold and operating expenses from its financing division grew 15%, hurting the gross margin. Likewise, although the operating margins are up 60 basis points over the last year and a half, operating costs have outpaced sales growth by nearly 200 basis points over the last six months. That's going to hurt the rolling operating margins going forward.
|
Margins % |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
1/06 |
|---|---|---|---|---|---|---|
|
Gross |
31.2 |
31.3 |
31.5 |
31.8 |
32.1 |
32.1 |
|
Op. |
7.6 |
7.7 |
7.8 |
7.9 |
8.1 |
8.2 |
|
Net |
7 |
6.8 |
6.8 |
4.8 |
4.5 |
4.6 |
One Fool says:
The rivalry between Target and Wal-Mart (NYSE:WMT) remains epic. Like Target, Wal-Mart does not always file its sales results press releases with the SEC (you can find them here). The global retail giant reported its Q1 and April numbers on the same day that Target did.
Wal-Mart grew total sales 12% for the quarter, and like Target, accelerated sales growth in April, reporting a 16% improvement. Comps-wise, Wal-Mart didn't fare so well. Comps rose 3% for the quarter, but slacked off toward the end, with less than a 1% improvement year over year. In other words, Target may be growing more slowly than Wal-Mart overall, but Target customers love the stores so much that they're returning to spend more, much more often, than are Wal-Mart's -- and this trend has been improving in recent months. Is it any wonder, then, that Wal-Mart wants to become more like Target?
Competitors:
- Amazon.com (NASDAQ:AMZN)
- Costco (NASDAQ:COST)
- Dollar Tree (NASDAQ:DLTR)
- Payless (NYSE:PSS)
- Sears Holdings (NASDAQ:SHLD)
Amazon and Costco made Tom and David Gardner's favorites list in Motley Fool Stock Advisor , while Wal-Mart and Dollar Tree were spotlighted for value hounds in Motley Fool Inside Value . Get full access to these and any of our other Foolish newsletter services with a free 30-day guest pass.
Fool contributor Rich Smith does not own shares of any company named above.
