It has been a strange time for retail. Low oil prices were expected to put more money into shoppers' pockets and send them running for the store. Some retailers have fared less well than others.
But according to TheStreet's Jim Cramer, whose Action Alerts PLUS charitable trust holds Target in the portfolio, Walmart's problems were from store closures and the strengthening of the U.S. dollar. Walmart earns almost 30% of its revenue from outside the U.S. while Target is purely domestic, he said.
According to Cramer and AAP's research director, Jack Mohr, "We will be looking at whether persistently low oil prices have resulted in a stronger low-end consumer -- we believe there is still pent-up demand and spending emerging from recent high savings rates. In addition, we will keep a close eye on the company's execution, especially on the digital and online front, as this was the cause for much of the prior quarter's disappointment."
They add they "remain confident the company is set to benefit over the long term from continued focus on signature categories and favorable spending capability from consumers. We reiterate our $80 target."
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Target shares, at $73, are down less than 1% for the year to date, a relative outperformer compared to the 5% decline in the S&P 500 (SPX) index and the 3% decline in the SPDR S&P Retail ETF (XRT) - Get SPDR S&P Retail ETF Report . If the Minnesota-based retailer exceeds analysts' estimates Wednesday, its shares could be considered a bargain.
For the quarter, analysts expect Target to earn $1.54 a share on revenue of $21.83 billion, translating to year-over-year growth of 2.6% and 0.4%, respectively. For the full year, earnings are projected to rise 10.5% year over year to $4.72 a share, while revenue of $74.08 billion would mark an increase of 2% from the year-ago quarter.
Those estimates, particularly in terms of revenue, aren't breathtaking. Nonetheless, Target -- having beaten the Street's earnings estimates in five of six quarters -- has done enough to offset weak consumer spending. This is a testament to its sound management team that continues to push buttons in their attempt to grow sales.
One of these buttons is the company's work on converting its in-store pharmacies to CVS Health (CVS) - Get CVS Health Corporation Report pharmacies in a store-within-a-store format. The CVS Health pharmacy conversion has begun in various North Carolina Target locations and is expected to expand to 1,672 Target pharmacies in the next six to eight months.
This move will help Target generate more customer traffic, which climbed 1.4% in the third quarter, and will allow Target to focus on growing its core business. At the same time, Target's digital sales, which climbed 20% last quarter to account for about 3% of total sales, can also become a greater focus as the company expands its online capabilities to compete against Amazon.com (AMZN) - Get Amazon.com, Inc. Report .
So Target is quickly moving beyond being a turnaround story to one that is focused on growth. The stock, with its solid dividend yield of 3.13%, is very attractive for its long-term growth potential.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.