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Target Marks Soft October Sales

Zacks Equity Research

Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, registered an increase of 2.4% in comparable store sales for October 2012, driven by a rise in average transaction size.

However, sales were below an escalation of 3.3% marked in October 2011. In terms of performance, Target also lagged its peer, Costco Wholesale Corporation (COST), which witnessed an augmentation of 7% in comparable store sales during the period under review.

Category-wise, Target reported solid sales in Food, with health and beauty increasing in the mid single-digit. The company stated that sales in home category increased in the low single-digit, while apparel marked a marginal rise. However, hardlines witnessed a downfall. Alongside, the company registered escalated sales in every region.

Minneapolis-based Target Corporation announced that net retail sales for October elevated 3% to $4,982 million from $4,839 million reported in the year-ago period.

For the third quarter of 2012, Target registered a 2.9% increase in comparable store sales, in line with the management’s expectation but well below the 4.3% rise in the prior-year quarter. Net retail sales rose 3.4% to $16,601 million. Year-to-date, comparable store sales enhanced 3.7%, while net retail sales increased 4.3% to $49,589 million.

Going forward, the company expects fiscal third quarter 2012 adjusted earnings in the range of 83 cents to 93 cents a share.  The current Zacks Consensus Estimate for the third quarter of 2012 is 80 cents, representing a year-over-year decline of 1.9%. Moreover, the company expects comparable store sales to increase in the low single-digit in November 2012.

Currently, we prefer to have a long-term Neutral recommendation on the stock. However, Target holds a Zacks #2 Rank, which translates into a short-term Buy rating.

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