Classy discount retailer Target
What analysts say:
- Buy, sell, or waffle? Twenty-one Wall Street firms cover the red rings, with 15 buy recommendations and six holds between them. More than a thousand CAPS users have rated the stock, pinning a four-star rating to it.
- Revenues. $14.7 billion, a 10% annual improvement, would slake the revenue thirst of your average analyst.
- Earnings. The analyst consensus calls for $0.80 per share, up from $0.70 last year.
What management says:
Target built 15 new stores in the first quarter, bringing the store count to an even 1,500, but planned to step things up with 42 grand openings in the second quarter. I now have at least five SuperTarget stores within a 20-minute drive from my house, and there's another one opening up in the next couple of months. I say "at least" because they may have snuck in some more stores around here somewhere without me noticing.
What management does:
That frenetic pace of store openings, plus decent comps -- 4.3% in the last quarter, for example -- equals impressive sales growth. The trick, then, becomes running the show smoothly, and the rock-steady margins tell me that Target is doing just that.
|
1/2006 |
4/2006 |
7/2006 |
10/2006 |
2/2007 |
5/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
32.1% |
32.2% |
32.4% |
32.5% |
32.6% |
32.7% |
|
Operating |
8.3% |
8.3% |
8.3% |
8.4% |
8.7% |
8.8% |
|
Net |
4.6% |
4.6% |
4.6% |
4.6% |
4.7% |
4.8% |
|
Y-O-Y Growth |
1/2006 |
4/2006 |
7/2006 |
10/2006 |
2/2007 |
5/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
12.3% |
12.2% |
11.7% |
11.5% |
13.1% |
12.3% |
|
Earnings |
27.7% |
24.2% |
17.0% |
14.4% |
15.7% |
16.9% |
One Fool says:
Why wouldn't Target hit the mark? After all, the chain has met or beaten analyst estimates in every quarter since 2004. That's two misses less than Wal-Mart
You could argue that Target simply sets more realistic expectations in its guidance than the competition does. Management gives its guidance by telling us how reachable the consensus analyst estimates are, which gives the Wall Street gang some incentive to run the numbers right, along with an easy adjustment process.
Regardless the reason for Target's uncanny accuracy, it makes for an easy-to-read progression of results. You can usually take the estimates as a low-end guide to the real results. The miss in the fall of 2004 came on the back of the worst hurricane season in recent history, and aside from the bridge collapse in Target's hometown earlier this month, I haven't seen any major calamities that could knock this train off track.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the prognosticator of prognosticators.
