Author Topic: TGT - Target  (Read 11715 times)

Viking

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TGT - Target
« on: May 08, 2011, 11:43:11 PM »
Does anyone have an opinion on Target. I have not followed the company and being Canadian am not very familiar with their business (upscale Walmart?).

Are they in the same league as WMT or CSCO (in terms of business model and management team)?
Are they a top tier retailer?

My quick and dirty analysis says the company is cheap; in the near term, due to the investment being made in Canada and aggressive remodelling of existing stores, earnings growth will be lower (next two years) and then should ramp up significantly. Sentiment is pretty poor.

2010 EPS = $3.86 (was $4.00 but $0.14 was one time tax gain); Jan is fiscal year end.
2011 Est EPS = $4.25; mgmt in Feb guided to 10% increase
Div = $0.25/quarter = 2%; should see increase announced soon
Shares = $50.51; PE = 12
Company has aggressively repurchased shares over the years and appears very shareholder friendly.
Management is targeting at least 10% earnings growth over next 6 or 7 years (EPS = $8.00 by 2016 or 2017).

Jan announcements:
1.) Canadian expansion: purchased rights to Zellers locations; expect to have 100 to 150 Zellers open in 2013 or 2014. Purchase will impact EPS = $0.15 to $0.20; guidance above is net of this.
2.) selling credit card receivables; expect this to improve profitability of credit card business and improve growth which will benefit TGT and partner.  Analysts seem to be scratching their heads over this move.


bttmline

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Re: TGT - Target
« Reply #1 on: May 09, 2011, 07:34:11 AM »
I haven't dug into financials in a long time on TGT, but I can tell you about the company from a US consumer standpoint.
1. The quality of products, customer service, and overall store design of Target stores is far superior to Wal-Mart. The pricing difference is minimal and I won't even think of stepping into a Wal-Mart if a Target is near my area.
2. I don't have statistics, but to me its apparent that they have captured a majority of the middle to upper income shopper market from Wal-Mart.
3. They have expanded food, dairy, and produce over the last couple of years to compete in the supermarket business.

Selling the credit card receivables was one of the main points that Bill Ackman pushed for when he was pushing for change a couple of years ago.       

twacowfca

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Re: TGT - Target
« Reply #2 on: May 09, 2011, 08:38:32 AM »
I haven't dug into financials in a long time on TGT, but I can tell you about the company from a US consumer standpoint.
1. The quality of products, customer service, and overall store design of Target stores is far superior to Wal-Mart. The pricing difference is minimal and I won't even think of stepping into a Wal-Mart if a Target is near my area.
2. I don't have statistics, but to me its apparent that they have captured a majority of the middle to upper income shopper market from Wal-Mart.
3. They have expanded food, dairy, and produce over the last couple of years to compete in the supermarket business.

Selling the credit card receivables was one of the main points that Bill Ackman pushed for when he was pushing for change a couple of years ago.       

Generally agree except for the use of the word captured.  Walmart is my one stop shop.  They have  great price and variety for all basic necessities.  Target's selection is pitiful for groceries and other things I buy, but my wife prefers to shop there for clothing and certain household items.  We're penny pinchers, but Walmart's merchandise is a little too cheap for us in those catagories.  Even so, she still does most of her basic shopping at Walmart.

vinod1

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Re: TGT - Target
« Reply #3 on: May 09, 2011, 09:38:53 AM »
1. Walmart is the low price leader and I do not think anyone else is going to dent this in the next 10 years in US. Aldi is an exception but they have a pretty different demographic segment and do not think they are threat to Walmart's core customers. Here are the comments from Target CFO

They are low enough on price day in and day out that virtually no one with a sales mix that looks similar to their own can afford to compete with them on price. We could not afford to compete with them on price as we do, if our sales mix looked like WalMart's.

We can compete with them and do compete with them directly head on on price on the overlap of the typically commodity and consumable related SKUs that we share in common, but of course we end up enjoying 20% of our sales in apparel with virtually no direct overlap in 20% of our sales in home products with very little overlap, some, but not nearly the overlap that of course is in some of the more commodity and consumable areas of the store. - Doug Scovanner - Target Corporation - EVP, CFO

 
That said, Target focus is on the upper middle class segment while Walmart focus is on the lower middle class. If economy is going to face GD2 at any time in the next few years, there are few businesses better than Walmart to own in such a scenario. Target's upper middle class customer base brings its own advantages as it is able to better withstand a poor economy (though not a deep recession) and is able to sell a greater mix of higher margin goods. Target carved out a "differentiated strategy" that it does not go head to head with Walmart for the same customers so there is space for both to co-exist.

2. Sequoia has both Walmart and Target and think Target has the better management. Hearing the management speak I get the impression they are pretty straight shooters and do not see any red flags. Did not really dig into their management though.

3. Target still has greater scope to expand in the US while Walmart is closer to saturation except for a few metro areas. Internationally, Walmart is not looking to make a great push into any developed market that already has good retailers that have wrung out the inefficiency and they specifically mention Canada as one example. Given this, I am not sure how successful Target would be in Canada.

4. Think both are proverbial 80 cent dollars - good to great businesses at a fair price.

Vinod
The fundamental algorithm of life: repeat what works. –Charlie Munger

Viking

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Re: TGT - Target
« Reply #4 on: May 09, 2011, 11:36:32 AM »
I do like TGT's (relatively) small size; lots of growth opportunities in the coming years. TGT results also look to be more volatile than WMT.

I think they will do well in Canada (similar to Walmart) as their business model/niche looks to be a good fit. Here are some research results: www.bizjournals.com/twincities/news/2011/05/03/study-canadian-shoppers-eager-target.html

DCG

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Re: TGT - Target
« Reply #5 on: January 15, 2015, 07:17:18 AM »
Target is shutting down it's entire Canadian operation and closing 113 stores:


http://money.cnn.com/2015/01/15/news/companies/target-ends-canadian-operations/index.html

augustabound

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Re: TGT - Target
« Reply #6 on: January 15, 2015, 07:39:09 AM »
The couple of times I was in Target stores here I was underwhelmed like most people. Empty shelves and prices seems average at best (not that I comparison shop but nothing stood out).

It sounds like most people had the same experience I did.

I couldn't believe that the estimate for turning a profit here was 2021.
"Serenity now, insanity later." - Lloyd Braun

Uccmal

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Re: TGT - Target
« Reply #7 on: January 15, 2015, 08:25:49 AM »
Yeah, The stores were an abomination.  That was short lived and entirely predictable.  They are going to be stuck with some pretty ugly leases for a long time. 
GARP tending toward value

augustabound

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Re: TGT - Target
« Reply #8 on: January 15, 2015, 08:32:53 AM »
Yeah, The stores were an abomination.  That was short lived and entirely predictable.  They are going to be stuck with some pretty ugly leases for a long time.

Yeah, and they took some seedy locations too. I guess you have to if you follow Zellers though, they were seedy central even in the nice malls.

The one here in Newmarket is prime real estate at the corner of Davis and Yonge with Target fronting Yonge St. and next to the main entrance to the mall.
The mall itself has undergone a series of renovations the last 5 or 10 years. If they can expand the footprint or build up then a big box can take over the space. As it sits, it's pretty small compared to big box power centres.
I'm not sure if Newmarket is on Nordstrom's wish list.

As for the other 132 locations is anyone's guess.
"Serenity now, insanity later." - Lloyd Braun

intothebreach

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Re: TGT - Target
« Reply #9 on: January 15, 2015, 09:46:00 AM »
I only went to one and only once to get a specific Xmas gift that was supposed to be on sale (was not, but not necessarily Target's fault on that one), but from a few of the stores that I could ses around Montreal, it seems that at least a few location were anchor positions in smaller, beat down malls, those that have been supplanted by larger shopping centres and the more recent clusters of shops in a single location (such as Brossard's Dix30 at the corner of highways 10 and 30).

My uneducated of Target prior to the Canadian debacle was positive. But from their very rough start in Canada to this, I now question their decision making. No position whatsoever.