Behind Target's rally last week

It seems like we have an odd quandary in retail. On the one hand we have U.S. retail sales (all products, all sectors) that were down 0.9% in June. On the other, we have retail behemoth Wal-Mart Stores Inc. (NYSE: WMT) sales that were up 2.4%. We also have Target Corp. (NYSE: TGT), the second-largest discount retailer in the U.S., that posted a spike of 3.3% in June same-store sales while its overall June sales were up 7.6%. Is this some kind of paradox? Not at all, it's just that the June sales for both retailers took wind of normal summer seasonality and beat the bad press at the same time, while other industries suffered.

Target and Wal-Mart can have similar months and different months. While the U.S. auto industry was reeling from a lower-than-expected June sales month, discount good retailers were raking in the sales. Again, the housing market is always cited as a reason people are not buying as many cars, yet are spending more at discount retailers. Oh yes, the "gas prices" million-headed monster is always brought in for good measure as yet another reason for the current retail environment. But with prices probably not ever seeing the $2.50 level again, "higher gas prices" is no longer a reason to use against any metric, right?

Target and Wal-Mart will be squaring off in July and August as the summer continues, and it will be interesting to see if both retailers rise above year ago levels and post modest or very nice gains in same-store sales. For now, both retailers are basking in the glow of June that may not last that long. Target's shares were up to a new all-time high last Thursday on June's news. Will the $80 mark be broken come end of July?