Mass retailer Target (NYSE:TGT) reports third-quarter earnings on Monday morning. Its archrival from Arkansas is doing OK, but not great -- what does that mean for Target's slightly fancier ambitions?

What Fools say:
Here's how Target's CAPS rating stacks up against some of its peers and competitors:

 

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating (out of 5)

Wal-Mart Stores (NYSE:WMT)

$216.1

16.4

****

Target

$26.2

14.4

***

Costco Wholesale (NASDAQ:COST)

$21.6

17.3

****

Best Buy (NYSE:BBY)

$9.4

8.8

***

Sears Holdings (NASDAQ:SHLD)

$5.6

13.6

**

Data taken from Motley Fool CAPS on 11/14/2008.

"In this economic environment, retail is going to suffer," says all-star CAPS player rayandfran in defense of a thumbs-down rating. "Although Target has primarily budget items, they are also going to feel the pinch of a slowed economy."

But, "The store has revamped itself," says fellow all-star simplylearning. "Its sustainable, organic product offering is growing fast with prices significantly lower than local health food stores at the same time more people want these products."

What management does:
As the gross margin trend shows, Target is not budging on pricing, even in this molasses-slow retailing environment. Sales have nearly stopped growing altogether, and profits got hit by an alien shrink ray, but the company is still profitable. These results hardly set the world on fire, though.

Margins

5/2007

8/2007

11/2007

2/2008

5/2008

8/2008

Gross

31.4%

31.2%

31.1%

31.6%

31.5%

31.2%

Operating

8.7%

8.7%

8.5%

8.3%

8.2%

8.0%

Net

4.8%

4.8%

4.6%

4.5%

4.4%

4.2%

FCF/Revenue

0.9%

0.8%

0.6%

(0.4%)

0.4%

1.1%

Growth (YOY)

5/2007

8/2007

11/2007

2/2008

5/2008

8/2008

Revenue

12.3%

11.9%

11.4%

6.5%

5.7%

4.9%

Earnings

16.9%

16.8%

12.7%

2.2%

(2.9%)

(7.2%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Right now, Target is a middle-of-the-road retail investment in my eyes. Wal-Mart is growing faster, Bed Bath & Beyond (NASDAQ:BBBY) sports fatter margins, and Hennes & Mauritz wins on both fronts.

Slow consumer spending is hitting mid-range retailers like Target where it hurts, and it's even spreading into the rarefied air around luxury wranglers like Nordstrom (NYSE:JWN). I'm less interested in what the autumn season looked like than in how the company is gearing up for the holiday rush. I'm with the bears on this one -- it might take some margin-cutting sales on a massive scale to nurse this limping giant back to health.

Sears Holdings, Best Buy, and Bed Bath & Beyond are Motley Fool Inside Value selections. Costco Wholesale, Best Buy, and Bed Bath & Beyond are Motley Fool Stock Advisor selections. The Fool owns shares of Best Buy and Bed Bath & Beyond. Try any of our Foolish newsletters today, free for 30 days. Or just sign up for a free CAPS account to read more from your fellow Fools who were quoted above!

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he occasionally shops at all of them. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.