Article Excerpt:
TWST: Would you start with an overview of your coverage?Mr. McKeever: I cover discount retailers, the big discounters such as Wal-Mart (WMT), Target (TGT) and Kohl's (KSS). I also cover the dollar stores, Dollar General (DG), Family Dollar (FDO), 99 Cents Only (NDN), Dollar Tree (DLTR), Fred's (FRED) and Big Lots (BLI). I cover off-price retailers TJX (TJX) and Ross Stores (ROST). And I have one outlier in my universe and that's Michaels Stores (MIK), which is an arts and crafts retailer.
TWST: Let's start with the bigger discounters. What's going on in that
business today?
Mr. McKeever: We've had Target performing very well over the past
several quarters, outperforming Wal-Mart by a fairly significant margin,
especially on the top line. In January, Target had a 9.4% increase in
same-store sales, a huge number, and against a relatively tough year-ago
comparison. Wal-Mart's comps increased 3.2%. Now, the outperformance has
not been all that pronounced in other months or in recent quarters, but
it's illustrative nonetheless of a bit of a dichotomy within the big
discount store space. Target is more focused on the higher-end discount
store consumer and Wal-Mart is really more focused on the lower-end
discount store shopper. Target has done better because of its different
positioning versus Wal-Mart. Target goes after a somewhat higher-end
customer than Wal-Mart, and Wal-Mart's core customer has been stretched
more by higher gas prices and minimal job and income growth. Target has
really been better positioned from a macro standpoint, and we've seen
evidence of that in the monthly sales numbers over the past two to three
quarters. Having said all that, looking into 2005, there are some
encouraging signs that the lower-end consumer is starting to feel a
little bit better. January was a good month for my group, even for the
dollar stores, which have been underperforming for a while. We saw all
of my dollar store names either meet or exceed expectations in January,
with comps up anywhere from 4% to 5%, and we're starting to see a little
bit more discretionary spending in the space and some encouraging signs
on the jobs and income fronts as well. So I think looking into 2005 we
should see Wal-Mart perform a little bit better on a relative basis to
Target, although Target is still likely to continue to outperform.
Tickers included in this excerpt: ACMR, BLI, DG, DLTR, FDO, FRED, GPS, JCP, KMRT, KSS, MIK, NDN, ROST, S, TGT, TJX, WMT
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