Cart (0)
business newsTarget Can Afford to Aim High
By
Justin Sharon
Nov 17, 2010 4:40 pm
Shares are up more than 4% after reporting robust second quarter earnings and issuing upbeat guidance going forward.
PRINT
 |
|
As one of those Gotham snobs who doesn’t actually deign to shop there and is inclined to call it Targe when speaking about it in public, I have no firsthand experience of its offerings, but from a stock perspective, it was certainly well worth the wait. The shares are outperforming 497 of the S&P 500 as I write, up over 4% on what is otherwise another dreary afternoon in equities after reporting robust second-quarter earnings and also issuing upbeat guidance going forward. Excluding a one-time $0.06 tax boost, adjusted EPS of $0.68 was well ahead of the $0.58 it posted a year ago and the key industry metric of same-store sales rose 1.6%.
On a company-sponsored conference call with equity analysts, CEO Gregg Steinhafel said Target is “encouraged by recent signs in the broader economy that may signal somewhat stronger and more stable sales in the coming months.” Using more ebullient language, he further stated comparative sales over the critical holiday will be the “best of any quarter in the last three years.” The company is clearly benefiting from penny-pinching customers continuing to go in search of a bargain in a weak, if recovering, economy. Analyst Brian Sozzi, although no better than Neutral on both companies, nonetheless believes “Target has more catalysts behind it right now [for a] better holiday season than Walmart (WMT).” Elevated credit write-offs and increased price pressures at source remain risks but for now the firm remains right on target.
Please see Retailers Slugging Out Final Stretch Try More Discounts, Hours
For a firm that earlier in the year opened a nonprofit outpost operating entirely on the honor system, Panera Bread (PNRA) sure knows how to make some dough. Shares in the casual dining outfit, known as Au Bon Pain until August 1998, are sharply higher and currently trading at an all-time record. Today’s catalyst is a Buy-from-Neutral boost by analysts at SunTrust Robinson Humphrey but with stock in this bakery and cafe operator already up over 50% in 2010, it's no overnight success.
It boasts an impeccable balance sheet, has outlasted the carb-killing cult of Atkins, and survived an especially skeptical Barron’s article in the summer of 2006 to emerge stronger than ever after subsequently streamlining its menu and simplifying its structure. Panera did about $2.8 billion in system-wide sales last year and gets a recurring rent-and-royalty revenue stream from having almost 60% of its restaurants operated by franchisees.
Concerns at these lofty levels? I undeniably enjoy its offerings but I’ll also often wash down a Così (COSI) sandwich with a Jamba Juice (JMBA), and because the combined value of each equity stands considerably under $4.00 I learned the hard way never to confuse a cult quick-service food or beverage company with its stock. Moreover, with an increasing number of meals being eaten at home in this austere era, the overall sluggish macro backdrop bears monitoring, as does increase in commodity and labor cost pressures at the St. Louis, Missouri-based chain.
Still, with last week bringing news of a nutrition professor in neighboring Kansas dropping 27 pounds in eight weeks by imbibing a diet of Doritos, any calorie concerns at Panera shouldn’t unduly worry investors.
Turn to Investors Uncover Panera Bread’s Secret Ingredient and Trendspotting: Investing in the New Fast Food for more.
With Rent-A-Center (RCII), catering more to mass, and Saks Incorporated (SKS), as high class as they come, both enjoying impressive afternoons on an otherwise uninspiring day in equities, maybe John Edwards was a profit without honor after all when waxing profound about there being “two Americas.”
The two companies are next to each other in only an alphabetical sense, with but one attracting the sort of undesirables who have shoplifted in their hallowed halls to the best of my knowledge. I’d like instead to talk today about the other. Texas-based Rent-A-Center, which is more plain old Plano than fancy Fifth Avenue, makes its money leasing durable items including furniture and electronics and was founded in the mid-80's conspicuous consumption boom.
Researchers at Stifel Nicolaus raised their 12-month price objective to $33 from $30 this morning after an analyst day. The brokerage note approvingly that Rent-A-Center’s customer roster has recently shifted to higher incomes as credit constraints take hold. Growth targets for 2014 have now been established and encompass compounding the top line by 4% to 6%. Furthermore, this can be leveraged into EBITDA growth in a range of 6% to 7% while also maintaining about $200 million of annual free cash flow, or roughly $3.00 per share. An interesting under-the-radar one to watch.
Also check out To Survive, Some Retailers Go Down Market and Seven Recession-Proof Companies.
On a day it was revealed Jim Morrison may get posthumous justice for indecent exposure, the company that owns rights to The Doors‘ greatest hits is experiencing some serious naked short selling. Warner Bros. may be about to make wicked money on a wizard but this week hasn’t been quite so kind to Warner Music Group (WMG).
Today was the day the music died at this Big Four record label that was spun off from Time Warner (TWX) some six years ago. It ended off over 7% in taking its 2010 slide to more than 23%. The company, whose record labels include Asylum, Atlantic, Bad Boy, Nonesuch, Reprise, and Sire, lost $46 million or $0.31 on an EPS basis in its fourth quarter. This was a dramatic deterioration even from its Dire Straits (another client) of a year ago, when Warner bled $18 million in red ink. Leadership lamented in a statement that “increases in digital revenue have not yet fully offset the declines in physical revenue.” CEO Edgar M. Bronfman faces an unenviable task to try to stem such a dramatic secular shift, a situation not helped by the label's highly contentious history with YouTube (GOOG) in particular. For now Warner Music is, in the siren song of a band it bought in the '80s, on a Road To Nowhere with no end in sight.
How Apple Caved to the Record Industry, Quick Hits: Digital Music Downloads Edge CDs, The Ballad of Bootleggin’ Music, and Dysfunctional Family Businesses: Seagrams contain related content.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
