This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

A Target for the Bears

Profitability was somewhat mixed at Target despite the 7.5% decline in operating income. Gross margins advanced by 50 basis points to 30.7%, while adjustments to vendor agreements contributed (in part) to a 20 basis-point improvement of that total.

Adjusted earnings per share looked worse than it really was -- falling 5% to $1.05 per share, which was below the company's target. But one-time items such as an early debt retirement absorbed 41 cents per share during the quarter.

The company's CEO Gregg Steinhafel was pleased with the performance. He said:

"Target's first-quarter earnings were below expectations as a result of softer-than-expected sales, particularly in apparel and other seasonable and weather-sensitive categories. While we are disappointing in our first-quarter performance, we remain confident in our strategy, and we continue to invest in initiatives, including Canada, our digital channels and CityTarget, that will drive Target's long-term growth."

Those were certainly encouraging words, but management still cut Target's full-year fiscal 2013 outlook. The company is now projecting earnings between $4.70 and $4.90 per share, down from its prior EPS guidance of $4.85 to $5.05. Management does not seem confident that comps will get back up at any point this year.

Analysts responded by issuing "sell" recommendations on the stock. But I wouldn't overreact here just yet. As with the struggles that are affecting Lowe's, I still see long-term success here for Target especially given the fact that we're still in an economic climate that has yet to fully recover. The fact that management has margins trending in the right direction is also a positive sign.

That said, management's main challenge is, among many, is to figure out ways to restore growth and position the company to compete for effectively not only against Wal-Mart, but also against the likes of Costco (COST) and Kohl's (KSS).

I believe shares of Target are fairly priced today. That's not to be interpreted as a bad thing. But to the extent that Canadian store expansion and the company's CityTarget initiative can post "decent" growth numbers while also expanding margins, I believe patient investors will be rewarded.

That's a tall task. Investors should not expect these improvements to happen overnight. But I believe the company has the management in place to do it.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
TGT $81.56 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs