Last week I wrote about the biggest U.S retailer Wal-Mart. While the stock market had a terrible start of the year, Wal-Mart went in the opposite direction. What about the second largest discount retailer Target? The stock have so fare in 2016 been flat.
Target is over 100 years old, founded by Goodfellow Dry Goods in 1902, but the first Target store was opened in 1962. A lot of things have changed since then. Target operates 1,801 locations throughout the U.S.
Their retail formats include the discount store Target, the hypermarket SuperTarget, and small-format stores previously named City Target and TargetExpress before being consolidated under the Target branding.
A lot of retailers will come out with reports this week, and Target is one of them. They will report on February 24, before the open.
Estimize is looking for EPS of $1,54 and revenue of $21.896 billion, in-line with Wall Street on the bottom line, and around $35 million greater on the top-line. Target is projecting relatively flat earnings growth compared to the same period last year.
Target has gone online long time ago, and they had a record online traffic during the recent holiday shopping season. Amazon is the king in online-shopping and Target has a long way to go to come up to Amazon`s level.
Last quarter, digital channel sales surged 20% while also adding to comp store sales growth.
Target have a lot of job to do at handling massive inflows, and days like Cyber Monday, Black Friday and the holiday season are leaving many consumers frustrated. The company have made strategic hires combined with a renewed focus on higher-margin apparel.
Compared to Wal-Mart, Target generate above-average margins which is higher than their biggest rival Wal-Mart. The reason for that is Target`s higher –margin segments like home goods which accounts for about 36%. Wal-Mart generates only 14% in that segment.
Consumer prices in the U.S went up 1,4% YoY in January of 2016, following a 0,7% increase in the previous month. The inflation rate accelerated for the fourth straight month, but the U.S food inflation has dropped sharply last 12 months. From 3% last year to only 0,8 in January 2016.
Target hope to reach their goal in 2016 with a new and fresh leadership at the top. One of their goals is to make a multi-channel approach, which means they are looking for customers who shop in more than one channel at a time.
Their smaller-format stores will be 50% smaller than the typical 130,000-square-foot stores. Target`s urban locations will be about 45,000 square feet in size, and the reason for that strategic change is that the productivity levels are double those of traditional stores, and those stores will come in busy city centers.
Target recently sold its pharmacy business to CVS in a deal worth $1,9 billion, and in the next 6 to 8 months all 1672 Target pharmacies will be rebrand to read CVS, operating through a store within a store format.
This partnership is expected to serve as a compliment to the customer experience which will help drive higher traffic. The company is also focusing on the development of smaller format stores to penetrate urban and metropolitan areas.
In addition; Target has eliminated over 3000 stores and corporate employees in the U.S, estimated to save the company $2 billion.
All the changes makes Target`s future bright and I assume the new employees know the new target.
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Ket Garden
Shiny bull 