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Target (TGT) |
HenryTo
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 Posted: Wed May 19, 2010 11:43 pm Post subject: Target (TGT) |
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Morningstar on TGT's 1Q results:
| Quote: | | We are maintaining our fair value estimate after reviewing Target's TGT first-quarter results. While retail sales fell short of our projections, operating profit was slightly higher than expected, driven by gross margin improvement due in part to higher private-label penetration and controlled spending. Although the first-quarter comparable increase of 2.8% is below our full-year estimate of 4% comp growth, we remain optimistic that the top line will get a boost in the back half of the year from the new PFresh format, which will increase the space devoted to food in roughly 20% of the firm's stores. Total revenue was $15.6 billion, up 5.1% from the year-ago quarter, with a 5.5% increase in retail segment sales offsetting a 7.9% decline in revenue from the credit card business. We are encouraged by signs that more-discretionary categories, like apparel, continue to show strength, which bodes well for Target, since its product mix is skewed toward nonessential goods. Margins are improving, thanks to sourcing efforts to drive gross margin expansion and the firm's disciplined approach to spending. The company reported an operating margin of 8%, up from 6.9% in the prior-year period. We expect 6% sales growth in 2010, driven by a 4% comp increase and square footage growth in the low to mid-single digits. Modest margin expansion is likely as the company continues to update its merchandising assortment while tightly managing inventory levels and operating costs. |
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Target (TGT) Replies |
HenryTo
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Joined: 06 Aug 2004
Posts: 11742
Location: Los Angeles, California
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| Posted: Sun Apr 08, 2012 11:38 pm Post subject: |
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Morningstar's latest comments on TGT.
| Quote: | Target's ROIC is set to decline as the company builds out its food business.
Target TGT reported a 7.3% same-store sales increase for March, which is the third straight month of improvement on a sequential basis, since posting disappointing 1.6% comps in December. Albeit against the easiest year-ago comp comparison of negative 5.5%, recent sales trends continue to suggest that Target is adapting appropriately to Wal-Mart's WMT first wave of price cuts and is regaining its market share footing. The two-year comp rate did decelerate meaningfully to 1.8% in March from 8.8% in February. However, just flat same-store sales in April against the toughest year comparison of 13.1% would significantly reaccelerate the two-year comp rate. Management is guiding to low- to mid-single-digit comp increases for next month.
Management moved first-quarter operating and GAAP earnings per share guidance higher to reflect better-than-expected sales in the quarter and a favorable resolution of some income tax uncertainties. Still, we are not making any material changes to our long-term thesis and fair value estimate at this time because we still expect sales increases to come at the expense of lower profit margins, in particular, as Target responds to Wal-Mart and the PFresh initiative is completed. Moreover, we expect the sharp increases in gas prices (up 22% year-to-date) to pressure the recent positive customer traffic trends and household discretionary budgets in the months ahead.
Recent payroll additions, the benefit of an earlier Easter and favorable weather helped to move both average transactions and tickets higher. In March every region in the United States posted solid positive same-store sales. In terms of performance by category; comps in food were up in the midteens, household essentials reported a mid-single-digit range increase, apparel and accessories were up in the low-double digits, and hardlines posted positive comps in the low-single-digit range. The softest sales performance came in the electronics and decorative home merchandise categories. |
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HenryTo
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Posts: 11742
Location: Los Angeles, California
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HenryTo
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Joined: 06 Aug 2004
Posts: 11742
Location: Los Angeles, California
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| Posted: Wed Nov 17, 2010 7:51 pm Post subject: |
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Morningstar on TGT's 3Q results:
| Quote: | | Target TGT remains a step behind our full-year estimates following softer-than-anticipated third-quarter sales, and comparable-store sales growth of 1.6% (2.1% transaction growth partly offset by a 0.5% decline in the average transaction size) was indicative of U.S. consumers' fixation on value. However, we believe the firm is poised for a strong finish to the year and meet our full-year top-line growth forecast of just over 4%. Given a holiday merchandise assortment strategically positioned to capitalize on consumer demand for several electronics and toy categories, heightened awareness of the 5% discount on purchases made with a Target credit or debit card, and recent PFresh store remodels, we anticipate that store traffic will accelerate in the final months of the year (consistent with management's belief that fourth-quarter comparable-store sales gains "will be the best of any quarter in the last three years," which implies greater than 3% growth). Additionally, effective inventory management and improving credit card segment metrics should keep Target on pace to achieve our full-year operating margin forecast of about 8%. There is no change to our fair value estimate. We find the current share price moderately attractive at less than 13 times our forward fiscal-year earnings per share estimate and an enterprise value/EBITDA multiple of about 7 times. |
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HenryTo
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Joined: 06 Aug 2004
Posts: 11742
Location: Los Angeles, California
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| Posted: Wed Aug 18, 2010 4:57 pm Post subject: |
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Morningstar on TGT's 2Q results:
| Quote: | | Target's TGT soft second-quarter retail sales results reflected an increasingly uneasy consumer mind-set, though improvement in its credit card business should keep the company on track to meet our full-year operating margin and free cash flow targets. There is no change to our fair value estimate, though we plan to make a few minor adjustments to our model assumptions based on the year-to-date results. Trading at less than 12 times our forward fiscal-year earnings estimate and a forward enterprise value/EBITDA ratio of about 7 times, Target shares are attractive, in our view. With expectations of only mild food price inflati on during the back half of the year and year-to-date comparable-store sales growth of 2.2%, we plan to modestly trim our full-year sales estimates. We now anticipate comparable-store sales to come in toward the lower half of management's 2%-4% target. That being said, we were encouraged by solid store traffic during the quarter, which we suspect was partly helped by increased rollout of the PFresh layout (which has bolstered the grocery and consumable product mix at a few hundred stores at quarter's end). We also expect a favorable traffic impact from the 5% cash-back program offered on purchases made with a Target credit card during the back half of the year. Robust apparel sales trends were also encouraging during the second quarter, as it demonstrated Target's ability to get through to consumers despite increasing promotional activity among full-price apparel stores during the quarter. The year-to-date operating margin of 7.3% is tracking just a bit below our full-year ta rget in the high 7% range. However, we are optimistic that second-half operating margin trends will improve, even if top-line trends remain sluggish, as improving delinquency rates in Target's credit card division (and subsequent bad-debt expense moderation) more than offsets any negative impact from lower-margin food products. |
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