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Target Plans Largest Expansion in Its History and Gurus Benefit from Dollar Tree's Earnings Beat
Posted by: earningsyield (IP Logged)
Date: February 27, 2013 10:28AM

U.S. markets had a small rebound Tuesday after the 1% pullback on Monday. Overall, the markets didn’t have much reaction to Fed Chairman Ben Bernanke’s appearance before congress. The media will now focus its attention on the upcoming sequester which is set to kick in on Friday. In the meantime, earnings season continues with several retailers reporting and set to report.


Target (TGT) exceeded analysts estimates as it record EPS of $1.65 on revenue of $22.73 billion. Analysts were expecting EPS of $1.48 on revenue of $22.69 billion. Shares are slightly down following the earnings release. Wall Street didn’t like the rise in expenses but more expenses are coming as the company is set launch the largest store opening program in the retailer’s history with plans to open 124 stores in Canada and several in the U.S. The company also forecast un-adjusted EPS of $4.85-$5.05.

Gurus have been mixed on the retailer with a number of Gurus selling out or reducing their position as the stock approaches new highs. Those Gurus include:
Shares of discount stores Dollar Tree Store (DLTR) are up almost 10% in early trading as the company had EPS of $1.01, exceeding analyst expectations of $0.99. The company also forecast higher than what analysts were expecting. For the coming year, the company is expecting EPS of $2.54 to $2.74 on revenue of $7.79 billion to $7.97 billion. Analysts expected of $2.81 and revenue of $7.9 billion.

Dollar Tree's earnings have increased in recent years as a sluggish U.S. economy has helped drive customer traffic. Analysts had lowered their expectations as the economy recovered as they feared customers would move away from dollar store operators and spend their dollars on higher ticket items.

Several Gurus have been taking advantage of the Dollar Tree’s pullback and have started or added to their positions. Those bullish include:
Finally, rumors are swirling that high-end retailer Coach (COH) might put itself for sale. These rumors are unconfirmed but the stock is up in early trading as it recently hired a former Nike (NKE) executive to make over its stores as it tries to become more than just handbags.

The sole Guru purchasing shares of Coach lately is Robert Olstein who runs the Olstein All-Cap Value Fund. Coach currently represents 1.3% of his portfolio.

Disclosure: None

Guru Discussed: Ray Dalio: Current Portfolio, Stock Picks
Julian Robertson: Current Portfolio, Stock Picks
Stocks Discussed: TGT, DLTR, COH,
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