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Target June Comps "Relatively Soft" - Update

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Discount-store operator Target Corp. (TGT) on Thursday reported "relatively soft" comparable same store sales for June, falling short of market expectations.

The company's comparable store sales for the five weeks ended July 3, 2010 increased 1.7%, compared with a decline of 6.2% last year.

While the result was in line with the company's own prediction, an increase of 2.7% was expected by analysts surveyed by Thomson Reuters.

Clothing, food, health care products attracted buyers,But electronics and multi-media sales were weaker.

While reporting same-store sales results for the month of May, Target had said it expects a low single-digit increase in comparable-store sales for the month of June.

The increase in comparablestore sales for June was the result of growth in comparable-store transactions, partially offset by a decrease in average transaction size of about 1%.

The company's net retail sales for the month rose 4.0% to $5.92 billion from $5.69 billion in the prior-year period.

Gregg Steinhafel, chairman, president and chief executive officer of Target Corp. said, "Sales remained relatively soft for the second month this quarter, though we continued to experience favorable merchandise sales mix, effective retail expense control and strong profitability in our credit card segment."

Comparable-store sales performance for June was strongest in food, healthcare and beauty, which generated comparable-store sales increases in the mid to upper single digits. Comparable-store sales in apparel increased in the mid single-digit range, led by double-digit increases in shoes and ladies' apparel, with the softest performance in children's apparel.

Comparable-store sales in hardlines declined in the mid single-digit range, with the strongest performance in sporting goods. The softest performance was in electronics, which includes video games, and in music, movies and books. Comparable-store sales in home were down slightly, with a mid single-digit increase in lawn and patio, and the softest performance in domestics.

Regionally, Target recorded better than average comparable-store sales performance in markets in the mid-Atlantic, Northeast and upper Midwest. Comparable-store sales performance was weaker than the rest of the chain in portions of the South, Southwest and Northwest.

For the quarter-to-date period, Target's comparable store sales increased 1.5%. This compares to a 6.1% decline in the same period of the prior year. Net retail sales for the period rose 3.9% to $10.54 billion.

The company's comparable store sales for the year-to-date period were up 2.3%, compared to a 4.7% decline in the year-ago period. Net retail sales for the period increased 4.9% to $25.70 billion.

Looking ahead, Target said it continues to plan its business cautiously, with a focus on disciplined execution of its strategy across the company.

For the month of July, Target said its comparable-store sales results will compare the four weeks ended July 31, 2010 to the four weeks ended August 1, 2009. The company expects a low single-digit increase in its comparable-store sales for the period.

In June, Target reported a 1.3% increase in comparable store sales for the month of May, compared with a decline of 6.1% in the same period last year. Net retail sales rose 3.7% to $4.62 billion from $4.46 billion in the prior-year period.

Target's retail segment includes large general merchandise and food discount stores and Target.com, a fully integrated on-line business. In addition, the company operates a credit card segment that offers branded proprietary credit card products. The company currently operates 1,740 Target stores in 49 states.

Among Target's rivals, Costco Wholesale Corp. (COST) earlier today said that its same-store sales grew 4% for June. The company's U.S. comparable store sales were up 2% and international comparable store sales grew 14%.

Excluding the positive impact of higher gasoline prices and the strengthening of foreign currencies, Costco's total comparable sales rose 3% in June. Issaquah, Washington-based Costco also reported a 7% increase in net sales for the month to $7.33 billion from $6.87 billion last year.

BJ's Wholesale Club Inc.'s (BJ) June comparable club sales increased 3.8% including a contribution from sales of gasoline of 0.6%. Excluding gasoline, merchandise comparable club sales increased 3.2%. Total sales for the month were up 7.9% to $1.08 billion from $71.00 billion in the comparable period a year ago.

In Thursday's regular trading, TGT is trading at $50.03, down $0.40 or 0.79% on a volume of 2.46 million shares. In the past 52 weeks, the stock has been trading in a range of $36.36-$58.52.

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