Target has performed well in the discount sector while competitors have lagged behind. During December the company posted a year-over-year same-store sales jump of 5.1%, while Wal-Mart's chains increased 3%. One reason Target has performed so well is because it attracts a higher income customer than other discounters, and these customers are less affected by increased gasoline prices," Fitch points out.

Another development that helped Target was the sale last year of its Mervyn's and Marshall Field's chains for $4.2 billion. The transaction has helped the discounter reduce debt and repurchase its shares.

Target has no plans to expand internationally in the near future, Fitch says, though the company is analyzing overseas retail markets. The company currently has 1,313 stores in the US. A Lehman Bros. report last year said Target has the ability to double its store count in this country.