Expected Upside Gains for Leading Retailers (COST, WMT, TGT, M, JWN, KSS, BBY)

The retail sales growth outlook for the coming holiday season has been cut to around 3%, only half the growth retailers saw in the 2010 holiday season. Of course, last year followed the dismal 2009 holiday shopping season, so the gain was magnified by the low comparison point. We’re looking today at target prices for the stocks of seven large retailers: Costco Warehouse Corp. (NASDAQ: COST), Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT), Macy’s Inc. (NYSE: M), Nordstrom, Inc. (NYSE: JWN), Kohl’s Corp. (NYSE: KSS), and Best Buy Co. Inc. (NYSE: BBY).

Costco Wholesale Corp. (NASDAQ: COST) has a median target price of $88.50 from 22 brokers. In mid-afternoon trading today, the stock changed hands at $81.31, for an implied gain of $7.19, or 8.1%. Costco’s forward P/E is 18.37, and the company’s dividend yield is 1.2%, the lowest among these seven stocks. The stock’s 52-week trading range is $61.90-$86.34, and it’s trading today at about 31% above its 52-week low and 6% below its 52-week high. Costco has been expected to do well as shoppers strive to keep spending down, and the company has not disappointed. Same-stores sales growth in September came in 12%. The share price has grown by nearly 30% in the past year, far outpacing both Walmart and Target.

Wal-Mart Stores Inc. (NYSE: WMT) has a median target price of $59.00 from 20 brokers. In mid-afternoon trading today, the stock traded at $55.28, for an implied gain of $3.72, or 6.3%. Walmart’s forward P/E is 11.92, and the company’s dividend yield is 2.6%, the highest among these seven stocks. The stock’s 52-week trading range is $48.31-$57.90, and it’s trading today at about 14% above its 52-week low and 5% below its 52-week high. Walmart said earlier this week that sales are on track to grow by 5%-7% for its 2013 fiscal year which ends in January. Analysts had been expecting growth of 4.7%. The retailing giant also noted that same-store sales growth has been positive in each of the past three months.

Target Corp. (NYSE: TGT) has a median target price of $58.50 from 22 brokers. In mid-afternoon trading today, the stock traded at $52.70, for an implied gain of $5.80, or 9.9%. Target’s forward P/E is 12.14, and the company’s dividend yield is 2.3%. The stock’s 52-week trading range is $45.28-$60.97, and it’s trading today at about 16% above its 52-week low and 14% below its 52-week high. Recent troubles with the company’s web site led to the departure yesterday of the president of the division. Only about 2% of Target’s revenues come from its web site, and that more  than the outages was reason enough to replace the division’s leader.

Macy’s Inc. (NYSE: M) has a median target price of $35.00 from 13 brokers. In mid-afternoon trading today, the stock traded at $29.05, for an implied gain of $5.95, or 17%. Macy’s forward P/E is 9.57, and the company’s dividend yield is1.4%. The stock’s 52-week trading range is $21.69-$30.62, and it’s trading today at about 34% above its 52-week low and 5% below its 52-week high. Macy’s posted unexpectedly good same-store sales growth in September, and the company expects to post sales growth near 4.5% for the full fiscal year. The company’s Bloomingdale’s division gives it a solid player in the luxury retail sector that is expected to post a year-over-year gain this holiday season of around 7%.

Nordstrom, Inc. (NYSE: JWN) has a median target price of $53.00 from 18 brokers. In mid-afternoon trading today, the stock traded at $49.80, for an implied gain of $3.20, or 6%. Nordstrom’s forward P/E is 13.92, and the company’s dividend yield is1.8%. The stock’s 52-week trading range is $35.92-$52.15, and it’s trading today at about 39% above its 52-week low and 5% below its 52-week high. Nordstrom’s same-store sales growth in September more than doubled expectations. Investors have noticed, as the luxury retailer’s stock price is nearing its 52-week high, with is only $0.85 below its median target price.

Kohl’s Corp. (NYSE: KSS) has a median target price of $70.00 from 16 brokers. In mid-afternoon trading today, the stock traded at $50.09, for an implied gain of $19.91, or 28.4%. Kohl’s forward P/E is 9.75, and the company’s dividend yield is 2.0%. The stock’s 52-week trading range is $42.14-$58.00, and it’s trading today at about 19% above its 52-week low and 14% below its 52-week high. Kohl’s opened 30 new stores in 20 US states in the month of September and it now operates 38 more stores than it did at the end of last year. But the company also recently lowered fiscal year guidance, which has slowed its climb back from the 52-week low the stock set in early September.

Best Buy Co. Inc. (NYSE: BBY) has a median target price of $27.00 from 19 brokers. In mid-afternoon trading today, the stock traded at $25.53, for an implied gain of $1.47, or 5.4%. Best Buy’s forward P/E is 7.1, and the company’s dividend yield is 2.5%. The stock’s 52-week trading range is $21.79-$45.63, and it’s trading today at about 17% above its 52-week low and 44% below its 52-week high. At the end of September, short interest in Best Buy stood at 12.75% of its float and its days to cover ratio is about 5.4. The 52-week low was set just two weeks ago, but has recovered somewhat since then. Any idea that Best Buy’s shares will close the gap with its 52-week highs during the holiday shopping seasons is surely no more than wishful thinking.

Paul Ausick