Target Corporation
(
TGT
) continues with its positive sales rhythm so far in 2012, and we
believe it will sustain the same tempo for the balance of the year.
The company's relentless endeavors to keep itself on the growth
trajectory have paid off in an economy, which is looking for ways
to shield itself from a financial turmoil that seems to have no
end.
Riding on Positive Comps
During the period from January to May, 2012, Target has
consistently registered comparable-store sales growth. In that
period, comps growth touched a low of 1.1% and hit a high of 7.3%,
thereby recording an average growth of approximately 4.8%. In the
first five months of 2012, comps increased 4.3% in January, 7% in
February, 7.3% in March, 1.1% in April and 4.4% in May.
Given the sluggish economic recovery, monthly sales data for
Target also portrays a decent performance. Within January to May
2012, the company registered a minimum sales growth of 2.1% and a
maximum growth of 8%, reflecting an average growth of approximately
5.6% for the period. It registered sales growth of 5.1% in January,
8% in February, 7.9% in March, 2.1% in April and 5% in May.
Let's Conclude
Target is persistently trying every means to keep afloat in this
sluggish economic environment. The company's P-fresh remodel
program, 5% REDcard Rewards program, City Target stores, The Shops
at Target initiatives and its foray into the foreign market are its
arsenal to safeguard itself from any unprecedented events.
Target's efficient marketing, multi-channel strategy, product
innovation, compelling pricing strategy, and new merchandise
assortments should drive comparable-store sales and operating
margins in the long term. We expect the company to gain market
share, and believe that more focus on consumable items should boost
sales and earnings in a sluggish consumer environment. The
company's long-term objective is to attain $100 billion or more in
sales and $8.00 or more in earnings per share by 2017.
The economy has not yet recovered fully. It is evident that the
company's customers remain sensitive to macroeconomic factors
including interest rate hikes, increase in fuel and energy costs,
credit availability, unemployment levels, and high household debt
levels, which may affect their discretionary spending, and in turn
curtail the company's growth and profitability.
Moreover, a greater concentration of the company's revenue
generating capabilities in limited regions of the United States
poses a competitive threat to Target, compared with
Wal-Mart Stores Inc.
(
WMT
) and
Costco Wholesale Corporation
(
COST
), which are geographically diverse and more resourceful.
Consequently, Target is focusing more on store renovations and
improving store sales productivity. Further, with the ever changing
consumer preferences, the company feels the need to adapt to the
demands of time and consider consumer-oriented strategies.
Currently, we maintain our long-term "Neutral" recommendation on
the stock. Moreover, Target retains a Zacks #3 Rank that translates
into a short-term "Hold" rating.
COSTCO WHOLE CP (COST): Free Stock Analysis
Report
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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