Should I Do It? Target Misses Mark

Target(TGT Quote) is the nation's second largest discounter behind Wal-Mart(WMT Quote), operating approximately 1,400 stores in 47 states.

The company has been held in high regard by Wall Street, even getting a pass for a weak first quarter. But there's ample reason to believe this company's performance will be off the mark for some time to come.

On May 15, Target announced that first-quarter profit rose 12%, just shy of estimates. More important, selling, general and administrative (SG&A) expenses were higher than expected, and cut gross margins by 18 basis points to 32.1%. Shares declined 8% on the news and at a recent $48.68 they're trading about 20% off their 52-week high of $60, set back in July.

To make matters worse, Wal-Mart posted better-than-expected first-quarter results one day later. The company attributed its strong quarter to reduced costs, better sales and improved inventory management. Analysts at Bear Stearns and J.P. Morgan, while acknowledging the poor showing, reiterated their ratings and remain optimistic on the stock, but the report indicates to me that Target's poor performance was company-specific, not industry-specific. ...