Real News on Target: Cruddy Forecast Not Cruddy Enough

The company's earnings were even lower than it had expected, so why the positive spin in the media?
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How compromised were Target's (TGT) - Get Report disappointing earnings, reported yesterday? Let The Business Press Maven count the ways -- though the biggest was the one often not mentioned by the business media.

Target, which reported a 4.4% drop in third-quarter earnings, among other nasty surprises, had already given warnings about the quarter. Got that?

If you think The Business Press Maven doesn't know his assets from his elbow, just heed me on this one item. When your numbers miss the mark after you've already gone on the record about lamer-than-expected sales -- especially when you are a good and forthright operation to begin with -- your disappointment is effectively doing double duty. Business is obviously slipping at a pace that even surprised the canny, well-respected management of Target. And that should be the point of emphasis in reports about the earnings.

Unfortunately for investors, the business media almost always simply compares results with consensus expectations the moment the earnings are reported.

Those negative things Target said about itself a matter of weeks ago? Already forgotten. As is the bleak forecast it gave in September. But when even the top operators can't get a handle at how quickly business is turning sour --well, that's bad, and it should define the take on the quarter.

But forget about defining. In its article "

Target Posts Lower Profit, Sees Lackluster Results,"

The Wall Street Journal

failed to even mention that Target's disappointing results were the second beat of disappointment for the cheap-chic chain.

The article talks about the surface results, a stock buyback, the wanting comparison with Wal-Mart and the potential fate of the credit-card unit. But we hear nothing about how the company already said that the quarter was looking grim. And the results were grimmer still.

Though the

Journal

does not look back with Target, at least it looks forward accurately, which is more than you can say for some this morning.

The

Journal

accurately assesses the near-term future in the lead, which is a welcome departure from the nonsense in one

Financial Times

article on the earnings.

Here is the

Journal

's accurate lead:

Target Corp. said it expects fourth-quarter per-share earnings will be "quite modest" relative to a year ago, partly because of a weakening economy that will hit sales of discretionary items during the crucial holiday season.

By comparison, here is

The Financial Times

' dopey headline: "Target upbeat on holiday despite profits fall."

Think that headline might have pulled a thread out of the article?

No such luck. Here's the lead, which stands in total contrast to the lead in the

Journal

:

Target, the US discount retailer, on Tuesday disclosed an unexpected 4 per cent fall in quarterly earnings but remained upbeat about the prospects for the important holiday quarter.

Bob Ulrich, the chief executive of Target, said that the company had not observed any "meaningful change in the intensity of the competitive environment" -- referring to

Wal-Mart

(WMT) - Get Report

, which Target had been besting but which bested Target instead. Because of this quote, the

Financial Times

article calls the company's view of the forthcoming holiday "sanguine."

And any word that sounds like sangria ain't bad.

But elsewhere in the

The Financial Times

, we get a different story. It's not quite the

Journal

's accurate emphasis on a modest fourth quarter, but it's a lot closer than a headline and lead trumpeting an upbeat holiday.

Said

The Financial Times

in an article appropriately called "Off Target":

Target, meanwhile, expects soft apparel and home sales to continue hitting gross margins as long as economic and housing worries persist.

And down a bit further:

On Tuesday, Target said this year's holiday promotional environment was not that different from past years, and not as desperate as some had suggested.

That's fine.

The Financial Times

doesn't think that Wal-Mart's revival is the problem, just the bad economy. But "not as desperate" is a long way from "sanguine."

The main thing, however, is that when a company has already said cautious things about the quarter

before

it disappoints, that should be noted prominently.

And with that, The Business Press Maven will take a fruity sangria in hand and start this Thanksgiving holiday. I find that sangria washes down the tryptophan well. I wish all of you a healthy and safe one. And please, take it from a guy who responds to car accidents as a volunteer fireman -- if you drink, let someone else drive.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

A journalist with a background on Wall Street, Marek Fuchs has written the County Lines column for The New York Times for the past five years. He also contributes regular breaking news and feature stories to many of the paper's other sections, including Metro, National and Sports. Fuchs was the editor-in-chief of Fertilemind.net, a financial Web site twice named "Best of the Web" by Forbes Magazine. He was also a stockbroker with Shearson Lehman Brothers in Manhattan and a money manager. He is currently writing a chapter for a book coming out in early 2007 on a really embarrassing subject. He lives in a loud house with three children. Fuchs appreciates your feedback;

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