Target Is Right On for Retail

Shop Talk, Pt. 2

Mad Money's Jim Cramer says if you only want to buy one retailer, buy the Wal-Mart killer, the company that sells the cheapest with the best characteristics of growth that we all love to shop at: Target.

On Monday's Mad Money, Cramer offered up retail plays in anticipation of what thought was an imminent Fed rate cut this week. He said Ralph Lauren and Nordstrom were good plays because the high-end always recovered first. After all, shoppers of these stories aren't exactly drowning in subprime mortgages. But even better than these two – the best of breed for the entire retail sector – is Target, he said.

Cramer called Target "the gold standard of shopping," saying that it was the best place to shop with kids. And more and more, customers are crossing the street, leaving Wal-Martin the dust, for an all-around better shopping experience.

From the investor standpoint, TGT is cheap. It trades at 17 times next year's earnings with a growth rate of 14%. And Target's putting up more stores and generating more growth than any other broadline retailer, Cramer said.

But as good as this is, it's not the best reason to own Target, as far as Cramer's concerned. There's a possible catalyst on the horizon that could be a boon to the company and to shareholders: the selling of Target's $7 billion credit-card business. Cramer figures the money from that sale would go right to a stock buyback, taking out almost a third of the current float.

If Target does sell its credit-card business, investors get a tremendous buyback, a second-to-none shopping experience, great growth, cheap valuation, a possible Fed cut and cold weather to drive more sales.

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