A little affirmation went a long way with Target (TGT) investors Thursday morning. Even though the discount retailer reported that sales have been falling, it maintained its quarterly earnings guidance -- enough good news to send the stock as much as 4.5% higher in early trading.

The Minneapolis-based company reported that same-store sales slid 6.2% for the five weeks ended July 5. Retail analysts polled by Thomson Reuters expected a drop of 5.6%. Target said the average transaction size declined along with sales volume.

Despite the slide, Chairman, President and CEO Greg Steinhafel said the company would meet or exceed analysts' consensus 64 cents a share earnings estimate when the fiscal second quarter closes at the end of the month.

"Sales for the month of June continued to reflect a very challenging economic environment," he said on a Thursday conference call. To combat slowing sales, he said the company would continue to cut costs and bolster its operating margins.

Dan Binder, an analyst at Jefferies & Co., says Target can't do much about declining retail traffic. "That's not a Target issue. That's a broader issue," he says. "But I think we will start to see some improvement from them and other [retailers] in the fall. The consumer is going to have I wouldn't call it a recovery yet but maybe a less tough time."

Another positive trend, according to CEO Steinhafel, is that store credit card defaults showed "modestly improving risk trends."

William Blair & Co. analyst Mark Miller noted on June 23 that Target s account balances that are delinquent by 30 days or more (two or more late payments), stood at 8.33% of the company s receivables in May versus 8.55% in April and nearly 9.0% at the end of 2008.

Bottom Line: Hold
Less bad doesn't mean good, and real growth will come from increased sales, not holding the line on expenses and gradually decreasing defaults.

Once Again, Emulex Rejects Broadcom Bid

Investors cast a decidedly negative vote on the decision by Emulex (ELX) board to reject a $11 a share buyout offer from Broadcom (BRCM) . Shares of the network equipment maker slid 8% in midday trading on news of the $912 million deal's implosion.

The Costa Mesa, Calif.-based maker of fiber channel networking equipment yet again rejected chip maker Broadcom's all cash offer, which was valued at a 66% premium to Emulex's shares in April, when the original takeover was proposed. In a statement, management said the board, "determined that the offer significantly undervalues Emulex's long-term prospects, is inadequate, and is not in the best interests of Emulex and its stockholders."

Broadcom President and CEO Scott McGregor said the time for talking was done. "We believe it is in the interest of each company's stakeholders to complete a transaction expeditiously or to move on," he said in a statement. Broadcom initially offered $9.25 a share in an unsolicited April takeover bid and then boosted its offer at the end of last month. Leaks to the press about the negotiations made it clear that they had become confrontational.

"This negotiation took a pretty nasty tone pretty much from the start," Morningstar analyst Brian Colello says.

In a June 30 report, BMO Capital Markets analyst Keith Bachmann wrote that Broadcom made it fairly clear $11 was as far as it would go.

"The raising of the purchase offer is not surprising, but BRCM s language around the terms of the offer is suggesting that BRCM will not move higher," he wrote. "ELX s response continues to make it very clear that it has no interest in this transaction, and management and the Board seem to share a common view."

Colello says that while the meshing of Broadcom's Ethernet chips and Emulex's networking equipment made sense, there's little chance this deal will get done.

Bottom Line: Sell
Emulex faces tough competition in a difficult environment, and investors should take whatever added speculative value remains in the aftermath of a busted deal.