Hitting the Right Target

NEW YORK ( TheStreet) -- Target ( TGT) shares are up 15% so far this year, and as much as 8% since the company reported its fourth-quarter earnings.

Although there were concerns that rising payroll taxes would hamper growth, the concern subsided after the earnings report. Whether or not they re-emerge is secondary to what Target has become in terms of operational efficiency. Target is no longer just an "upscale version" of Wal-Mart ( WMT).

The company's recent improvements have demonstrated a commitment towards finding that next leg of growth. Investors seem pleased with the progress. However, with the stock posting new highs and mere percentage points from its 52-week high, it's worth asking how far should Target be chased.

It was thought the end of the payroll tax holiday on Jan. 1 would cause consumers to start spending less. Wal-Mart noticed a slight pullback. These consumers may have gone to Target instead.

Target's efforts to win customers back with price guarantees seem to be working. The company promises if a shopper buys something at one of its stores it will match the price if the same item is found cheaper online at a number of retailers, including Amazon ( AMZN). Fourth-quarter numbers suggest this strategy is working better than expected.

The company posted a 7% increase in revenue for the fourth quarter, which arrived at $22.73 billion and met the Street's expectations. Comps for the quarter, weren't that great at 0.4%, which declined from 2.2% a year ago, and lower than the 1% posted by Wal-Mart. However, for the year Target posted comps of 2.7%, which is just a 0.3% decline year over year.

By contrast, J.C. Penney ( JCP) just posted a 32% year-over-year decline in comps, which arrived 6% worse than estimates.

Target's revenue growth still outpaced Wal-Mart's 3.9% although Target's overall number of transactions fell by 1%. Target made them all count as the amount per transaction increased 1.4%.

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