With the U.S. economy growing at an anemic rate (if it isn't already in a recession), investors should, in general, avoid the retail sector.

Still, there are those isolated companies, which, via either niche or operational execution, qualify as an exception, and with the above in mind Target is worth a review.

Target Corporation (NYSE: TGT) should post adequate FY 2009 same store sales growth, aided by refinements to its electronics, apparel, and home furnishings offerings, with a continued focus on value.


Further, 1600-store Target has handled the sector's competition well: it remains competitively-priced for comparable items with Wal-Mart Stores, Inc. (NYSE: WMT), offers an easier-access/more pleasant shopping environment than the latter, and has exhibited modest, selected pricing power, despite the U.S. economic downturn. That last point on pricing power should help TGT pass on cost increases to consumers.

In addition, Target's marketing campaigns seem to be registering better with upper-middle-income shoppers, who appear to be increasingly seeking better values. The Reuters FY 2009/FY 2010 EPS consensus estimates for TGT are $3.56 to $4.06.

The risks? Analysts are keeping an eye on Target's new store opening timetable. Additional increases in the price of oil/gasoline will further lower U.S. consumers' disposable income, and hurt TGT's results.

The First Call mean rating for TGT is: Hold. [19 firms]. Mean 2008 price target for TGT: $61 [high: $79, low: $48].

Stock Analysis: Target is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from TGT's shares. Sell/Stop Loss if you were to purchase shares in this company: $38.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.