Piper Jaffray Comments On Target Corporation Following April Sales Results

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