Company Research Paper (The Target Corporation)
November 21, 2013
Target Corporation (NYSE: TGT) is one of the top ten largest retailers in the U.S. by sales. In its most recent year in 2012, Target who has proclaimed itself as “cheap chic” produced over $70 billion in revenue through the sales of apparel, house wares, electronics and other products (Exhibit 5). At Target, corporate governance practices have been in place for more than 50 years, and continue to evolve to balance the interests of the Board, shareholders and management to maximize efforts. A majority of the 12-member Board is independent and selected based on success in their field and in relevance to their background in business and how well their skill sets adds diversity to the Board. To ensure that management’s interests are aligned with shareholders, Target has a compensation plan for senior management in the form of long-term equity awards based on Targets performance in comparison to a 15-company retail group. Target prides itself on diversity (suppliers, products, and communities), design, great customer service, affordable quality, and corporate responsibility giving back to the community. Like any retailer, Target’s long-term sales and income growth depend largely on the company’s ability to open new stores and expand into new emerging markets. As of 2012 it has approximately 1,763 U.S. stores in active operation and holds large plans to expand into the international market to compete with its main competitor, Wal-Mart. In January 2011, Target took its first steps by buying 220 Zellers stores for $2.3 billion in Canada and plans to convert 124 of these stores by 2013. On May 6 2013, “Target announced the soft opening dates for its first stores in Western Canada, including 22 locations opening on May 7 and two locations opening on May 14” (Quote-Stocks.com, n.p.). Target is expanding to Canada first because of it’s already large presence in the U.S. and it is a safe window to start with, what is popular in the U.S. is likely to be popular in Canada. By analyzing the financial performance of Target over the past six years, we can see that in 2008, Target was affected largely by the change in consumer spending patterns and that negatively impacted their traffic and sales, which lead to weaker than expected sales. In 2007, Target had sales/ credit card revenues of $64948, while in 2008, this only increased by around $3500, which is not what Target was expecting. The credit card issuers were also affected by the crumbling credit, and risk environment and this brought about higher-than -expected bad debt expense. Although in 2010, the Retail Segment sales has shown a significant increase of 3.7% over the year due to a 2.1% comparable-store increase combined with the contribution from the new Target stores. The retail Segment EBITDA and EBIT also shows an increase of 4.9% and 5.8%, respectively, compared to 2009 (Exhibit 5). Another factor that affected the sales growth was inflation that occurred in 2008 by around 2%. In 2008, the gross margin rate was 29.8 percent, which had fallen compared to the 30.2% in 2007. The sales mix in 2008, was what affected the rate in 2008, making it fall by 0.6%. Target operates its merchandise by getting into different arrangements with vendors where they do not buy or pay for any merchandise until and unless it is sold to the customer. Target is consistently seen to be in an excellent position to balance and cover their short-term liabilities as their current ratio has averaged 1.5x over the past five years (Exhibit 3). Over the years 2010, 2009,and 2008, sales that were made with the Target credit card was averaged typically around $3.8 billion and accounted for 6.0% of total sales. Target has been trying to reduce inventory every year by making complete use and efficiently using their supply chain, the inventory turnover ratio and days sales outstanding have been reducing throughout...
References: “Research and Analysis: Target Corp.” Stock Analysis on Net 100 U.S. Stock Market Leaders. http://www.stock-analysis-on.net/NYSE/Company/Target-Corp#Ratios
“Target Corp Key Developments.” Quote-Stocks.com. http://quote-stocks.com/TGT
“Target News, Articles and Analysis.” Trefis.com. http://www.trefis.com/stock/tgt/articles
“Target Report First Quarter 2013 Earnings”. Investor.Target.com http://investors.target.com/phoenix.zhtml?c=65828&p=irol-news&newsReleasesColumn01.3_rs=11&newsReleasesColumn01.3_rc=10&nyo=0
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