Discount retail stock Target (TGT) has been called the “cheap chic” store of choice for consumers seeking stylish goods at reasonably low prices.  Over the years, the Target mix of style and discounts has made TGT stock a profitable bet for retail investors.  TGT stock has been particularly strong over the past year with favorable earnings and sales numbers, as Target shares have climbed about 28% in the past 12 months. 

But will Target’s stock price gains remain strong going forward, or will TGT fail to hit the bullseye?  Here are five reasons why Target is going strong after earnings and why TGT stock will stay on target. 

• Target earnings post powerful beat.  Minneapolis-based TGT just posted fiscal first-quarter earnings that revealed a hefty 29% increase in net income. Target earnings were $671 million, or 90 cents per share, for the period ended May 1. That’s well above the $522 million, or 69 cents per share, the retailer earned in the first quarter of 2009. The Street was expecting earnings of just 86 cents a share.  Revenue in the quarter also impressed, coming in at $15.59 billion, a 5% year-over-year increase.
• Target same-store sales and credit card gains add up.  Target’s first-quarter gains were largely due to gains in the all-important same-store sales metric.  Sales at stores open at least a year jumped 2.8%.  Looking forward, the company expects to post a same-store sales increase of anywhere from 2% to 4% percent in the current quarter.  Target also saw strong gains in its credit card business division after breaking its Target store credit cards away from Visa.  Although credit card revenue fell 7.8%, profit in the segment surged to $111 million, nearly tripling the number from the same quarter last year.

• TGT stock is blowing out the competition.  Target’s recent quarterly beat stands in clear contrast to rival discounter Walmart (WMT).  The world’s largest retailer, Walmart earnings recently reported a much smaller year-over-year percentage profit increase than Target.  And unlike Target, Walmart’s same-store sales metric actually was down 1.1% for the quarter. The decline was far greater than the 0.6% decline analysts were expecting.   
• TGT stock price crushing rivals in 2010.  It’s been a wild year for stocks in general, and the retail sector hasn’t been spared.  Yet despite the volatility in 2010, Target shares have handily outperformed the competition.  Year-to-date performance for TGT shares as of May 19 was a gain of 11.7%.  Contrast that with the anemic 1.35% increase for the performance of broadline retailers as group.  As for chief rivals Walmart and Costco (COST), TGT trounces both.  WMT shares are down 0.77% so far in 2010, while COST shares are off 2.4%.
• Target stores have a vanity factor.  Perhaps the one intangible in Target’s favor is the “vanity” factor.  Sure, when the worst of the recession was here, shoppers shed image and just went for the lower prices offered by Walmart, Costco and other discounters.  Now that the worse of the recessionary pain is over, people have regained their vanity and now have returned to being much more image conscious.  As one Wall Street Journal message board writer recently put it, “Target is a nice place to go. Walmart may have good prices but I would rather tell my friends I came back from shopping at Target.”

For the aforementioned five reasons, buying Target shares should help your portfolio hit the bullseye.

As of this writing, Jim Woods did not own TGT stock.

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