Hbc Financial Analysis Investment
Hudson Bay Company & Target Corp.
External size-up
Economic
The Canadian economy is expected to grow by 1.8% by the end of 2012 and the United States’ economy is expected to grow by 1.5%. With low growth prospects and stagnant consumer spending, retail sales are threatened. A strong Canadian dollar poses another potential threat to Canadian retailers, as consumers are tempted to shop across the border. In addition, the IPO market in Canada is declining, with only three issues so far in 2012, compared to 14 in 2011. The limited number of recent IPO issuances demonstrates a lack of investor confidence in the unstable economy.
Industry
The Hudson’s Bay Company (HBC) and Target Corporation (Target) operate department stores in the highly competitive and fragmented North American merchandise and retail industry. In Canada, department stores account for 13.7% of retail sales as opposed to American department stores representing 8.5% of U.S. retail sales. With department store sales in the U.S. The low percentage of department store sales can be attributed to increased competition from big-box retailers, warehouse clubs and e-commerce websites. As a result, traditional department stores are being squeezed out of the broader retail industry. Thus, they must capitalize on high margin products and have goods available for online purchase to increase revenue growth. In addition, department stores are faced with the threat of volatile consumer spending, driven by the level of disposable income, brand equity, trends and seasonality. Department stores must predict fashion trends and time the release of goods according to seasonal trends to successfully attract consumers.
Internal Size-Up
Target
Target is the third largest retailer in the United States, with revenues of nearly $70 billion in 2011. Target has plans to open 125 to 135 stores in Canada by 2014, and has already purchased the leases on Zellers properties from HBC. Target emphasizes high quality and
External size-up
Economic
The Canadian economy is expected to grow by 1.8% by the end of 2012 and the United States’ economy is expected to grow by 1.5%. With low growth prospects and stagnant consumer spending, retail sales are threatened. A strong Canadian dollar poses another potential threat to Canadian retailers, as consumers are tempted to shop across the border. In addition, the IPO market in Canada is declining, with only three issues so far in 2012, compared to 14 in 2011. The limited number of recent IPO issuances demonstrates a lack of investor confidence in the unstable economy.
Industry
The Hudson’s Bay Company (HBC) and Target Corporation (Target) operate department stores in the highly competitive and fragmented North American merchandise and retail industry. In Canada, department stores account for 13.7% of retail sales as opposed to American department stores representing 8.5% of U.S. retail sales. With department store sales in the U.S. The low percentage of department store sales can be attributed to increased competition from big-box retailers, warehouse clubs and e-commerce websites. As a result, traditional department stores are being squeezed out of the broader retail industry. Thus, they must capitalize on high margin products and have goods available for online purchase to increase revenue growth. In addition, department stores are faced with the threat of volatile consumer spending, driven by the level of disposable income, brand equity, trends and seasonality. Department stores must predict fashion trends and time the release of goods according to seasonal trends to successfully attract consumers.
Internal Size-Up
Target
Target is the third largest retailer in the United States, with revenues of nearly $70 billion in 2011. Target has plans to open 125 to 135 stores in Canada by 2014, and has already purchased the leases on Zellers properties from HBC. Target emphasizes high quality and
Bibliography: HBC Final Prospectus. Hudson Bay Company, Nov 21, 2012. HBC Supplementary Prospectus. Hudson Bay Company, Nov 21, 2012. [ 4 ]. HBC Final Prospectus. Hudson Bay Company, Nov 21, 2012. (pg.4) [ 5 ] [ 21 ]. 2011 Annual Reports. Target (pg 33. pg 50) [ 22 ] [ 24 ]. 2011 Annual Reports. Target (pg 37) [ 25 ]