Piper Jaffray is reiterating its Overweight rating on Target TGT following the release of April sales results. April same store sales increased +13.1% which was below consensus and management's guidance, but was above our estimates and likely above most investors' expectations. Piper continues to believe the P-Fresh and 5% REDcard Rewards frequency initiatives are successfully driving share gains in the grocery category and among REDcard holders. However, the base business remains challenging given the current consumer spending environment.
At a conference last month, the company announced REDcard penetration through March was 8.1% compared to 4.7% in April 2010. Penetration in the KC test market during March was 11.3% and has continued to increase, giving management and us confidence there is a long runway for additional penetration. Piper believes
declining credit card delinquency rates are also a good indicator of penetration
given the aging of the portfolio and delinquency rate changes since the introduction of 5% REDcard Rewards.
Piper Jaffray has a $64 PT and Overweight rating on TGT
TGT closed Thursday at $50.34
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Posted In: Analyst ColorAnalyst RatingsConsumer DiscretionaryGeneral Merchandise StoresPiper Jaffray
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