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Target (NYSE: TGT) stock was up 2% in early morning trading after the company delivered a strong earnings report before the bell today (Wednesday).
Target Corp. reported earnings Wednesday morning, with a net earnings per share of $1.04 compared to analysts' expectations of $1.01 per share. Adjusted earnings per share, a measure the company believes is useful in providing period-to-period comparisons of results of its U.S. operations, was $1.11 in the first quarter of 2012, up 11% from $0.99 in 2011.
Same store sales rose 5.3% in the quarter, the highest growth in six years as consumers took advantage of the warm winter in many regions.
"We're very pleased with our first quarter earnings, which benefited from better-than-expected sales," said Gregg Steinhafel, chairman, president, and chief executive officer of Target.
But a continued Target stock rally is in jeopardy as 2012 bears a feeble retail outlook and cautious investor sentiment.
"We're in a period where there's little conviction to buy," Richard Cripps, chief investment officer at Stifel Financial, told USAToday. "The road ahead is too uncertain because of European concerns and the presidential election later this year."
For the second quarter of 2012 Target expects adjusted EPS of $1.04 to $1.14 and GAAP EPS of $0.94 to $1.04. The difference between the GAAP and adjusted EPS ranges represent the expected impact of expenses from store openings in Canada.
It might be hard for Target to continue the success of the first quarter, though, as April saw the slowest growth in retail sales of the year. Sales grew in April at 0.1% compared to 0.7% in March.
And shoppers haven't been letting loose at Target like they once did. Instead they were steady, but restrained.
"Consumers are not buying more at Target. What's driving their sales is maybe people are shopping a bit more often," Brian Sozzi, chief equities analyst at NBG Productions, told Reuters. "It's not like people are going in and loading up their baskets as much as they were a couple of years ago."
As uncertainty looms over the economy and job growth sputters, consumers are less and less willing to spend. After such a strong first quarter it seems that the economy, especially retail sales, cannot match that success in the second quarter.
The one area where Target and other U.S. retailers have an advantage over other international companies is their lack of exposure to Europe, which right now is a very good thing.
Wal-Mart Stores Inc. (NYSE: WMT), the leading U.S. discount retailer ahead of Target, reports their earnings tomorrow (Thursday). This will be another key indicator for the retail segment and the overall economy.
Target Stock Thrives; J.C. Penny Plummets
Target proved that it can still compete with Wal-Mart while J.C. Penny is starting to look more and more like a thing of the past.
J.C. Penny reported lower than expected earnings yesterday after markets closed. The company announced it would discontinue its quarterly dividends, sending shares down more than 15% in early morning trading. Earnings per share came in at a net loss of 75 cents per share compared to a profit of 28 cents a share a year earlier.
The string of bad numbers seems to have no end in sight for J.C. Penny. It reported that sales fell 20%, same store sales slid almost 19%, and it plans to lay off 15% of its staff by 2013 at the corporate headquarters in Plano, TX.
The decision to discontinue the dividend was the worst news delivered yesterday from CEO Ron Johnson, a former Apple Inc. (Nasdaq: AAPL) executive. At close to 3%, J.C. Penny's dividend yield was a primary attraction for investors in the troubled company. Discontinuing it leaves little hope for J.C. Penny stock and its turnaround efforts.
The company's outlook for the remainder of the year does not appear to be any better, as most analysts still expect J.C. Penny to report a loss.
JCP stock was down almost 18% by 2:30 p.m. EDT. Target stock was up 0.71% to $55.47.
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