What to watch as earnings season closes

Target's ads these days are all about stretching the dollar, especially on those purchases -- such as groceries or pharmacy goods -- that have people returning to stores often.

But the Minneapolis-based retailer is feeling its own economic pinch. Its labor and raw materials costs are rising much faster than in previous years. For many analysts, this cost inflation has become something to watch.

To keep profit margins intact, Target would have to increase prices -- not a good prospect as the country teeters on the edge of a recession. While it has been able to do that on food, it's not so easy to do with merchandise that shoppers are already steering clear of, such as housewares and clothing, as they pare back on nonessentials.

Analyst Mark Miller of William Blair & Co. noted that Target buys a greater-than-average share of its higher-end clothing, footwear, jewelry, linens and towels from Latin America. While prices are higher than for products from China, Miller writes that Target can save on transportation expenses and also "can limit markdowns by reducing its lead times and increasing its order frequency on goods sourced from Latin America."

Whether that will be enough to maintain profit margins will be determined in the next six months.

JACKIE CROSBY

During the Golden Valley-based chicken chain's first-quarter conference call, analyst Larry Miller of RBC Capital asked why the April numbers looked so good: "Are people coming in and just trying to drown their recession, is that what is going on, or are you getting a huge benefit from the combo meals, or what can you point to that says, 'Hey, we did something in April that caused people to come in and spend more money?'"

CEO Sally Smith credited basketball and the Easter Bunny. Sales were particularly strong, she explained, because of the timing of the NCAA tournament, the Easter holiday, new high-definition televisions and menu changes.

MATT McKINNEY

Despite Ameriprise's rough first quarter, Lehman Brothers analyst Eric Berg reaffirmed his "overweight" rating -- essentially a buy recommendation -- for the stock. After a series of meetings with company executives last week, Berg also kept his price target of $69 a share, significantly above the median analyst target price of $57.50, according to Thomson First Call.

Although the market has hit a rough patch, which naturally hurts a financial planning company, Berg wrote in a Mat 21 report that he thinks the Minneapolis company's return on equity will climb steadily "by expanding the productivity of its financial advisers, by increasing the average wealth of its typical new customer, by keeping a tight lid on expenses and by repurchasing its shares."

If costs can't be kept in line by curbing discretionary expenses, and scared customers stick with cash under the mattress, CEO James Cracchiolo told Berg that he would consider reducing head count at Ameriprise to hit his return-on-equity target of between 12 and 15 percent.

KARA MCGUIRE

At the insurance giant, it was a case of the kids outshining Grandpa.

Earnings came in just shy of market expectations, and Wall Street quickly fingered the problem: The Minnetonka's based company's core business of health insurance is struggling, even as sidelines in health information technology, disease management and prescriptions are growing fast.

Tom Marsico of Marsico Capital, citing subsidiaries Ingenix, Optum Health and Prescription Solutions, said it seems to him "that the parts are worth dramatically more than where the stock is trading now."

CHEN MAY YEE

Deep into an April 24 earnings conference call with analysts, Nash Finch CEO Alec C. Covington took stock of the broad price increases sweeping through the food sector. "We're seeing inflation and I hear a lot of numbers, and I can only tell you from an old guy who's been doing this for 30-plus years [that] this is the most inflation that I personally have seen in our business since the 1970s," he said. "This is unprecedented in recent periods."

What's a food distributor to do? Buy up lots more products at current prices, assuming prices will continue to rise. As he told analysts: "We will take a forward position on as much product and inventories as we can."

MATT McKINNEY

Call it the law of skipped haircuts.

In times of economic distress, people tend to let their hair down to save money.

That's normally bad news for hairstyling chains, unless you happen to be Regis Corp., with chains that include Supercuts, Cost Cutters and MasterCuts, and you can persuade people to pay more per visit.

Edina-based Regis raised prices at 5,600 of its 13,500 hair salons -- a potentially risky strategy -- and the result was the strongest quarterly gain in same-store service sales in eight years. On average, customers who visited Regis salons paid 7.6 percent more than a year earlier.

But higher prices, though effective in the short term, may not be enough to help the company through a protracted "long-hair cycle," if one occurs.

"This is a very affordable luxury and, even with increased prices, women are spending less on their hair than they have in years due to reduced visitation patterns," CEO Paul Finkelstein said in a quarterly conference call with analysts on April 23.

CHRIS SERRES