OK, so I've been positive on Big 2 discount retailer Target
Results from Target certainly spooked the market Monday morning. Fortunately, overall sales were not the big problem: Total revenue rose more than 12%, with comp-store sales up 5.1%. Sales were strong in categories like children's apparel and consumer staples, while home-oriented sales were reportedly disappointing -- only fair, I suppose, because I'm almost always disappointed whenever I go there looking for those items.
Going down the line, though, there were some items that seemed to bug folks a little more. The gross margin actually slipped a bit, and I think that's the first time that's happened since I started writing about this company. I think it's always worth noting that of the $110 million increase in pre-tax earnings, $60 million came from the credit card business and another $28 million came from an adjustment to depreciation and amortization. Net EBIT growth (earnings before interest and taxes) of about 2%, then, is not so compelling.
It seems that whenever there's the slightest hiccup at Target, the knee-jerk reaction is "Oh, my gosh, Wal-Mart
Longer-term, Wal-Mart might talk about going more upscale, but I'm not sure it'll succeed. In the meantime, Target is a very credible option to mall-based department stores like Sears Holdings
I can understand the idea of staying away from Target because of overall fears about the health of the U.S. consumer. That's not to say that I agree, but I at least can see the point there. In any case, these shares are getting more than a little interesting. A few more points on the downside and I just might add these to my own shopping cart.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).