- 17Nov
(Reuters) - Target Corp (TGT.N) expects to post its best same-store sales in three years during the upcoming holiday season, sending its shares up as some analysts bet it will outpace larger rival Wal-Mart Stores Inc (WMT.N).
The discount chain benefited from the strong performance of its credit card business in its third quarter and believes it will lure more shoppers during the holidays with a new credit card program that offers 5 percent off all purchases.
Target shares rose 3.4 percent on Wednesday. Wal-Mart said on Tuesday it expected to break a six-quarter streak of same-store sales declines in the United States during the holiday shopping season in the fourth quarter.
"Target has more catalysts behind it right now (for a) better holiday season than Wal-Mart," Wall Street Strategies analyst Brian Sozzi said. He has a "neutral" rating on both discounters.
Target's U.S. sales have grown as consumers who feel more secure in their jobs trade up to its stores from rivals like Wal-Mart for trendier clothing and home furnishings.
"Based on our merchandising and marketing plans ... we expect Target's fourth quarter comparable-store performance will be the best of any quarter in the last three years," Chief Executive Gregg Steinhafel said in a statement.
Target is also betting on its store credit cards, or REDcards, and has said that shoppers who sign up for them typically spend 50 percent more at its stores over the course of a year.
"The 5 percent reward program is a small part of their overall business, but I still think that it's a pretty powerful initiative to drive the consumer into the store," Sozzi said.
BETTING ON DISCOUNT
Many retail investors are betting on discounters this year as U.S. shoppers continue to search for bargains in a slowly recovering U.S. economy.
On Wednesday, warehouse club operator BJ's Wholesale Club Inc (BJ.N) posted a higher-than-expected quarterly profit and raised its forecast for the year, sending its shares up 3.6 percent.
Target's earnings for the third quarter ended October 30 rose to $535 million, or 74 cents a share, from $436 million, or 58 cents a share, a year earlier.
Excluding a tax benefit, Thomson Reuters I/B/E/S calculated earnings at 68 cents a share, matching the analysts' average estimate.
Target previously said that sales rose 3 percent to $15.23 billion in the third quarter. Sales at stores open at least a year rose 1.6 percent.
Target has been boosting sales through an overhaul of its stores that included adding fresh fruit and meats, as well as improving the merchandise and design of its electronics aisles.
In September, Chief Financial Officer Douglas Scovanner said that the food-section renovation will add 1 to 2 percentage points to same-store sales in 2011.
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