Getting back to even at Target

With Target set to release December sales results this Thursday, the issue isn’t whether the company’s results will be in line with expectations but the degree by which they are likely to exceed same-store sales guidance in the low- to mid-single digit range.

That guidance was thought to be rather conservative at the time it was released in early December for a couple of reasons. First, Target had just smoked its initial forecast for November comps to be in the low single digits by producing a 5.5% increase. Second, the factors that drove the November results, such as a larger percentage of stores in the PFresh format and the launch of the 5% Rewards program, likely have an equal or greater impact during December. Then there is the issue of prior-year comparisons. Target is lapping a modest 1.8% increase last December, but the company still has a lot of ground to make up from declines the prior two years. Same-store sales in December 2008 declined 4.1% and in December 2007 they declined 5%.

The one negative from the month is that severe winter weather hit the Northeast and kept people at home when they might otherwise be redeeming gift cards, but Target knows a thing or two about bad weather -- what with being based in Minneapolis --- and surely the potential negative impact of a winter weather event is something that get’s factored into guidance.

Of course these are all things known to investors, which helps explain why the company’s share price has been on a tear the past few months. After beginning November in the low $50 range, shares advance steadily the past few months and began the New Year in fine fashion by hitting a new high of nearly $61. Unless Target’s comps are absolutely phenomenal, as in double digits, don’t be surprised to see shares of the company take a hit on Thursday.