Shopping for value: Nordstrom & Target

by Geoffrey Seiler, editor BullMarket.com

Target (TGT) reported that its August same-store sales rose 4.2%, above the 3.1% increase expected by analysts. Nordstrom (JWN) reported that its August comparable-store sales surged 21.0%

Both retailers are holdings in our recommended portfolio, and both stocks remain buy rated. Here's our reviews for the two companies.

Target said same-store sales across every region saw an increase. For September, Target expects same-store sales to grow by a low single-digit percentage.

With back-to-school shopping, August is one of the most important months for retailers, and Target delivered strong sales results, as did most of the retail complex.

Despite the economic recovery remaining uneven and slow jobs growth, the U.S. consumer continues to be willing to open their wallets.

As for Target specifically, its REDcard Reward program continues to resonate with customers, who are spending more per trip, and its grocery offerings have been a big hit as well.

In addition, it has regained its fashionably chic mojo back, helped by limited-time designer offerings a few times a year.

We think Target is on the right track and that its move into Canada should prove to be a nice future growth driver.

If the company can meet its 2017 EPS goal of $8.00 or more -- and its assumptions don't look too aggressive -- we think the stock could top $100 in the next several years. We currently rate the stock a "Buy" with a target price of $72.50.

Meanwhile, Nordstrom's August sales were helped by a shift in the timing of its Anniversary Sale. Nonetheless, that was well above the 11.1% growth analysts had expected.

Same-store sales at its namesake stores rose 24.0%, while Nordstrom Rack comparable-store sales rose 7.1%.

While the shift in Nordstrom's Anniversary Sale skewed the monthly results to the upside, it was nonetheless a blowout month.

The company continues to hit on all cylinders, driving strong sales not only with its strong fashion assortment, but also with its industry-leading customer service and website as well.

That said, don't expect a repeat in September, as the retailer faces its toughest year-over-year comp (10.7%) and two-year comp (18.2%).

All in all, we consider Nordstrom the top multi-channel retailer around. Its department store has proven to be a destination spot that helps drive mall traffic, while its Rack concept has the best sales per square–foot in the off-price space and solid expansion opportunities.

Meanwhile, the investment in its website, combined with free shipping on all orders, has also been driving sales. Its flash sale website HauteLook has the potential to be a future growth driver as well. We rate the stock a "Buy" with a $62 target.

Learn more about this financial newsletter at Geoffrey Seiler's BullMarket.com.

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