Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

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Tuesday, July 18, 2006

Target Missing Its Own Target

Target (TGT) is trading down over 3% pre-market after lowering its same store sales forecasts for July. This actually isn't a ghastly forecast, but it isn't pretty either. The drop was from a range of +4% to +6% down to a new range of +3% to +4%.

This is a stock that has actually been in trouble for the last year, although it had doubled the two-years prior to that. The stock has now given back roughly half of those prior gains.

The implication is that this is signalling a weaker consumer, even though we already knew Joe Q. Consumer was being tapped out with higher rates, higher gas and utility bills, and a slower economy without higher home prices boosting the implied equity.

You cannot use Preice/earnings (P/E) ratios alone as a barometer of how the retailers are valued by the street, but it is at least one of the places to start. Below is a list of P/E's from the comparable retailers:

Stock & P/E's
Target(TGT) 17.06
Wal-Mart(WMT) 15.7
Costco (COST) 23.6
BJ's Wholesale (BJ) 14.5
Sears(SHLD) 21.9

Jon C. Ogg
July 18, 2006

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