Retail Wrapup: Bullish on Target, Old Navy and TJ Maxx

 |  Includes: GPS, TGT, TJX
by: Dan Carty

Each time I visit a retail outfit in my area, I come back to this site and give a review of of my experience. Yesterday was “retail comp” Thursday where retailers announced same store sales [SSS] results. Overall, according to the WSJ, “retailers turned in better than expected same store sales results as consumers shopped for fleece, sweaters and leggings.” Personally, I was not shopping for any of those goods and the weather around my area has been warm for the most part so either I am looking in the wrong stores or the WSJ did not do it homework.

In any event, I thought I would try to bring together my shopping experiences with the SSS results of companies I follow here at Traders Insights. Here is a brief of Target, Gap and TJX Corp.

Target (NYSE:TGT)

In looking at the information Target released yesterday, I am a bit puzzled. In the 3 stores I visited in the month of September, the busiest areas of their store that Target cites were not the busiest areas I saw up close and personal at the stores in my area. As I mentioned from September 23rd, the busiest parts of the store were “toys, books, DVDs and furniture.” The management of the company cited “cooler weather, sales of children’s clothing and strength in merchandise for infants and toddlers.” I will admit that the baby section was busy (along with toys) but the weather was anything but cool around here and compared to last year, was only about 4 degrees cooler using number from

I think the story here is rather simple. When Target missed expectations in July and August, store traffic levels were similar the levels I viewed in September. What was the difference between those two periods? Well the weather was cooler but I do not believe that that made a difference. The key is the fall in gasoline prices. In short, the browsers became the buyers. The shopper who was buying a limited amount of goods earlier in the summer now had some extra money in September to spend. Target is taking this increase in sales as sustainable. Perhaps it is or is not. I will be watching the traffic patterns.

As for the trading of this stock, it is now rubbing up against its previous highs. I would remain bullish on the chart as the DM buy trend is bursting higher. There is risk though in buying here given that it is at the previous high. A break of this level points to $75 on the chart. Since I think unleaded gasoline will continue its drive lower, Target could get some help here and keep those better than expected numbers for October and November. If unleaded reverses, than I think Target’s numbers will be in jeopardy as will the stock price.

Old Navy (NYSE:GPS)
I have not been to an Old Navy since the beginning of the month but I did browse through the front of a Gap a week ago. Sales of the Gap store (along with Baby Gap) were decent though it was the height of the shopping day at a local mall. In comparison to a visit a few months ago, this level of traffic was about the same. Combining this same level of traffic with the slow environment in the Old Navy stores that I visit, the results yesterday were somewhat predictable. Old Navy was better than expected though lower (Perhaps the higher priced items that I mentioned in my note had something to do with this). While the numbers were better than expected for GPS, they were still down year over year.

From a trading standpoint, the interest of venture capital funds has driven this stock higher and a doji reversal was confirmed at the end of last month supporting this bounce. GPS has broken past its previous highs and the DM buy trend has turned up. Is this a sustainable move? If the whole sector rallies and GPS continue to do better than expected, perhaps the price will rise. Otherwise, if SSS remain negative, the move in the stock will be limited. I would be cautiously bullish at this point from the chart (half of a position at best).

Marshals & TJ Maxx (NYSE:TJX)

This retailer is operating on all cylinders. It is too bad I missed this earlier in the summer or I would be up a good deal of money. Anyhow, the SSS numbers were outstanding and the company raised guidance. I have been saying that traffic was strong and the technological advancement mentioned last week on this site at the registers, is speeding up the sales process which in turn invites more people to shop in the store. I remain bullish for this company on a fundamental basis.

From a trading standpoint, this stock is trading as strong as it did in 2000 (and 1995 for that matter). It broke out from previous highs near $25. I think TJX trades to $30 which means the stock has more upside to the trade. I would argue that given the strength of the DM trend, I could see a bit more upside from there; especially if the earnings momentum continues. I remain bullish.

TGT vs. TJX vs. GPS 1-yr chart:

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