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By David Gibbs

Target Corp. (NYSE: TGT): “Cheap Chic” may be back en vogue.

Earnings: Q1 profit of $0.90 vs. $0.90 consensus and $0.69 for Q1 last year (see transcript here).

Revenue: Up 5.1% to $15.59 billion vs. $15.58 billion consensus.

TGT’s Q1 numbers suggest that last year’s weakness “was more an issue of [economic] cyclicality and less an issue of company-specific weakness,” said one analyst. “This should result in accelerating comp and earnings growth as the economy recovers.”

Target chief executive Gregg Steinhafel credited the Q to a “stronger-than-expected economic environment.”

Comment: TGT’s relatively sunny report came as a bit of surprise considering Wal-Mart’s (NYSE: WMT) recent glum outlook. WMT noted on Tuesday that it is still seeing considerable economic sluggishness and that clothing, a discretionary category, was a soft spot during its first quarter. Apparently they haven’t tried out Cheap Chic, because while WMT has been busy slashing prices, TGT has been striking deals for exclusive lines by designers as a way of trying to raise its cache. And just in case the recession does crawl back out from wherever it’s been hiding, TGT has also been adding more groceries to its stores in a more defensive and competitive move.

Overall, this was a pretty strong report. If you’re looking for a way to play defense with your portfolio in the coming weeks/months, TGT may be a better bet than WMT.

Click images to enlarge

Polo Ralph Lauren Corp. (NYSE: RL): An earnings beat and a strong rally in a tough market.

Earnings: Q4 profit of $1.13 vs. $0.64 consensus and $0.44 for Q4 last year (see transcript here).

Revenue: Up 9.2% to $1.34 billion vs. $1.24 billion consensus.

“With a modest rebound in the luxury shopper, we see RL continuing to execute its global growth strategy with international expansion in Europe and Pacific/Asia and entering new product categories and/or taking back licensee business,” noted an analyst at S&P who has a $105 target on shares.

Comment: There is very little bad to say about this quarter, as more customers are shopping for RL and, perhaps more importantly, more are paying full price. The company not only beat but raised guidance as well. Shares closed up Wednesday at $88.10, up nearly 3% on a really tough tape. This is the type of stock that will definitely suffer if economic data starts looking more like the stock market has been looking lately. But if you’re looking for a play on continued consumer strength, this could be the company for you.

Deere & Co. (NYSE: DE): A good day for a piece of Americana.

Earnings: Q2 profit of $1.28 vs. $1.09 consensus and $1.11 for Q2 last year (see transcript here).

Revenue: Up 5.7% to $7.13 billion vs. $6.63 billion.

“The initiatives [to lower costs] they put in place during the downturn last year seem to be paying off now,” noted one analyst.

Comment: Like RL, this is another outstanding quarter out of a company that is going to need the economy to continue to improve if it wants to keep exceeding analyst expectations. DE’s rosy outlook was propelled by rising demand for large, high-horsepower farm machinery in the U.S. and better demand in South America, where sales are benefiting from low-interest financing from Brazilian government programs.

DE closed Wednesday up nearly 3% but is relatively flat on the year. As the world’s foremost seller of farming equipment, there is little question that DE can offer you some exposure to the worldwide economy should you be looking to make a bet on a furtherance of the recovery.

Disclosure: No holdings in TGT, WMT, RL, DE.

Source: Earnings Review: Target, Polo Ralph Lauren, Deere Make Good Bets for Continued Consumer Strength

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