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All about the outlook

The retail world takes center stage this week as financial markets are poised to dissect a slew of earnings reports from major retailers who will be sharing details on the profitability of holiday sales, perspective on the state of the economic recovery and the outlook for consumer spending during the remainder of 2011.

Target is among the companies scheduled to report, but before its numbers are released on Thursday plenty of competitors will have shed light on their operations. Companies such as Walmart, Macy’s, Home Depot, Office Depot and Barnes & Noble are scheduled to release earnings on Tuesday followed on Wednesday by Lowes, TJX, Limited, Dollar Tree and Chicos. On Thursday, in addition to Target, other companies reporting results include Gap, Safeway, Kohl’s and Sear’s Holdings. JCPenney is scheduled to report on Friday.

As tends to be the case with earnings reports, the actual results companies report are of less significance to the markets than the guidance provided. It happens all the time where a company reports blowout numbers and upon expressing a modest degree of reservation about future earnings potential sees its share price get pummeled.

Whether such a fate awaits Target remains to be seen, but the company has a large number of initiatives underway that are going to draw keen interest from analysts regardless of where sales and profit forecasts fall relative to consensus numbers.

For example, there are sure to be questions about the expenses associated with the PFresh remodeling program, whether there have been further reductions in the time required to complete a remodel and the pace of remodel activity for the coming year. The impact this program is having on gross margins, customer traffic and average transaction size are also being watch closely.

Also of interest will be the company’s expansion into Canada now that the acquisition of Zellers stores has been announced and an update on the small format initiative now that it has been disclosed that the CityTarget name will adorn the stores.

As always, analysts will also be interested in Target’s perspective on the competitive environment from a pricing standpoint and what the company is seeing in terms of product cost inflation and how consumers may be reacting to efforts to pass through price increases.

And you can’t forget the 5% REDcard rewards program launched last October. Is this initiative producing the desired business results, and what kind of metrics will the company release to validate its claims?

And lastly, the fourth quarter earnings announcement tends to be a forum for the company to provide an update on some near term merchandising initiatives that will hit stores during the first quarter.