Target and BJ Earnings Tops Estimates on Strong Sales (TGT, BJ, WMT)

Discount retailer Target Corp. (NYSE: TGT) beat analysts’ earnings estimates of $0.86 EPS today, hitting a record $0.90 for a non-holiday quarter. The company’s sales revenues came in at $15.2 billion, below expectations of $15.58 billion. Retailer BJ’s Wholesale Club Inc. (NYSE: BJ) also reported earnings that exceeded expectations this morning. BJ’s earnings per share rang in at $0.49, higher than analysts’ estimates of $0.43. Sales totaled $2.55 billion, below estimates of $2.61 billion. Yesterday’s earnings report from Wal-Mart Stores, Inc. (NYSE: WMT) beat estimates of both EPS and revenues (Get full Walmart earnings here).

Excluding gasoline sales, BJ’s same-store sales rose 4.2% compared with the first quarter of 2009. In a rather strange sentence, the company also noted that the first quarter of 2009 saw sales increase by 7.5% (ex gasoline), presumably compared with the first quarter of 2008. What that seems to indicate is that as the economy tanked between 2008 and 2009, BJ sales improved. Then, as the economy got better from 2009 to 2010, BJ’s sales did not improved as much.

Given that comparison, one might conclude that BJ was preparing the ground for a rather lackluster earnings forecast. On the contrary, the company raised its annual earnings EPS guidance from $2.54-$2.64 to $2.58-$2.68. Maybe BJ’s management thinks the economy is going to stay soft and that customers will continue to shop at its warehouse stores.

That’s not what Target thinks is happening. Target’s chairman/president/CEO noted after earnings that the company’s strong retail sales were especially strong in “higher margin discretionary items” and he singled out apparel as being a particular bright spot. Target’s retail same-store sales grew 2.8%, but its selling price per item in a total transaction fell 0.7%. So, while discretionary spending improved, the company still had to discount in order to get shoppers to put the discretionary item into the shopping cart.

Target did not change its guidance after earnings and that is hurting its share price this morning. TGT stock shares are down about 1%, while BJ stock shares are up about 5% on its improved outlook.

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