America's second-largest retailer, Target (NYSE: TGT), announced second-quarter earnings this morning.
The discount retailer saw second-quarter earnings drop 6.4%, which was less than what the Street expected. For the quarter, Target earned 79 cents per share; down three cents from a year earlier but far better than the expected 66 cents per share.
Target was hurt by wary consumers who were less than willing to part with money on apparel and other "nonessential items." Target's CEO attributed the strong results to "very strong operating margin in our retail segment, and credit card segment performance in line with expectations."
Target is higher in early trading thanks to the stronger-than-expected results, and it looks like the stock could be gearing up for a run higher. Thanks to the day's strong start, shares of the retailer are higher than their 10- and 20-month moving averages, but still face resistance from their 50-month trendline. Thing is, there is plenty of room for the the stock to run higher before it would hit this trendline, which is in the $47 region. If the stock can gather enough momentum, it could make a serious run at toppling this resistance.
The good news for Target is that the firm's busiest time of the year is right around the corner. With back-to-school season upon us and Christmas right around the corner, the discounter could see a boost at the registers thanks to their prices and retail offerings. Low prices and quality products will be a staple for all families trying to go back to school and enjoy the holidays on a tight budget. This situation could help Target and its main competitor Wal-Mart Stores (NYSE: WMT).
That said, the technical picture for Target is slightly more favorable, although it will take a lot of guts to invest in retail right now.
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Reader Comments (Page 1 of 1)
8-18-2009 @ 12:57PM
Iridium said...
Targets earnings were helped by "strong operating margin". Not the thing anyone that does business with Target wants to hear. That means that Target forced suppliers to give them more points.
If you have wholesale deflation that is not followed by retail deflation you end up with higher profit with less overall sales.
It isn't even worth doing business with Target and Walmart because it is impossible for a supplier to stay in business. In the latest rounds of buying Target and Walmart have been asking for 70% margin. How is a supplier supposed to stay in business with 30% when they have to pay to produce a product and pay their employees.