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Outlook continues to improve


Target reported yet another month of negative same-store sales last week, but things should begin looking up for the company from this point forward. Customer traffic has increased, credit trends have stabilized and most importantly, same store sales comparisons in the month ahead become very easy.

We saw a bit of that in September as Target reported a 1.7% comp decline compared with a 3% decline a year ago and a modest 1.2% increase two years ago. A 1.7% decline isn’t necessarily good news, it was after all a decline. However, it was great in the sense that it was smallest decline experienced so far this year, assuming you factor out the 0.3% gain in April that resulted from an Easter shift, which made comparisons against the prior year easy and caused the 6.3% decline in March to appear worse that it actually was. If the Easter anomaly is excluded, monthly same-store sales at Target have declined for 15 consecutive months and are projected to do so again in October with the company’s official forecast calling for a decline in the low-single digits.

Target is likely erring on the side of caution with regard to its October forecast, as it is clearly up against an easy comparison from the prior October when comps declined 4.1% followed by an even easier comparison in November 2008 when it reported a 10.4% decline. There is a remote possibility that the company could exceeds its October guidance and produce a modest comp increase, but even if that proves not to be the case Target will almost certainly end its losing streak in November, thanks to the easy comparison against last year’s awful results.

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