Target (TGT) shares are trading up Thursday after the second-largest retailer reported better-than-expected​ fourth-quarter results. The good news should keep coming if the economic rebound doesn't falter.

Net income at the Minneapolis company fell 5.2% to $981 million, or $1.45 a share, while revenue rose 3.3% to $20.9 billion in the quarter. Excluding one-time items, profit was $1.49, topping the average $1.39 estimate of analysts surveyed by Bloomberg News.

What caught my eye were the comparable stores sales figures, which in the three months ending Jan. 28, 2012 rose 2.2%, surpassing the 1.5% increase reported by larger rival Wal-Mart (WMT).

Those are remarkable results, especially considering the steep discounting that retailers needed to deploy during the holiday season to lure in recession-weary shoppers.  Wal-Mart and Kohls  (KSS) were not able to navigate the tough economic environment as well as Target. The results also underscore the effectiveness of the retailer's push into groceries. The Target near where I live in New Jersey has the lowest prices on food in our area. On some items, the price difference isn't even close, which has got to be squeezing grocery chains pretty hard.

Shares of Target are up 4.7% since the start of the year, outperforming Wal-Mart, based in Bentonville, Ark., which has fallen more than 2% during the same time period. Target trades at a price-to-earnings multiple of 12.4, which is below its five-year high of 19.3, according to Reuters. Wal-Mart's multiple is about the same. Target, though offers more bang for your buck, if it continues to outperform Wal-Mart, which seems likely.

Target, like McDonald's (MCD), is uniquely positioned to capture lots of different kinds of consumers. Bargain hunters come for the groceries, while shoppers with more money come for the apparel and home decor and other types of merchandise. The chain also has mastered the art of creating a pleasant shopping experience with clean, well-lit stores.   Wal-Marts in my area always seemed dingy, which is why I avoid them.