An upgraded viewpoint

Citigroup retail analyst Deb Weinswig assigned a “buy” rating to shares of Target last week, after previously having a “sell” rating on the company. The sharp reversal is due to her belief that there is signficiant upside to Targets’ earnings per share and gross margin trends as the company’s same-store sales begin to improve.

“We expect Target’s comps to turn positive in (the fourth quarter) driven by positive traffic and an improved approach to holiday,” according to Weinswig. “Looking into 2010, a greater focus on food through Targets P-Fresh format, improved inventory levels in apparel, and stronger same-store sales in home due to positive housing turnover, coupled with easy comparisons, should lead to positive same-store sales growth.”

Other factors contributing to the upgrade related to a belief that Target will be able to accelerate private label growth and achieve expense leverage on a lower level of same-store sales growth.

“We also believe Target has a long runway of productivity improvements ahead, driven by improved labor scheduling, rigorous expense line reviews and increased management accountability, and in-store technology investments,” according to Weinswig.