Target Corporation (TGT) plans to sustain its remodeling program at existing general merchandise locations this year by adding an expanded food layout along with a deeper assortment of dry dairy and frozen items, improved store layout and enhancement of in-store shopping experience across departments, such as apparel, home, beauty, shoes and baby.
During fiscal 2011, Target remodeled 400 locations, bringing the total count to 900 stores. In 2012, the company plans to complete about 230 more general merchandise remodels in the U.S. that will result in more than 1,100 remodeled stores by the end of the year.
Target recently initiated remodeling program across 90 general merchandise stores located in the markets of Des Moines, Iowa; El Paso, Texas and Dayton, Ohio, which is slated to be completed on June 24, 2012. Currently, about 1,000 stores having a dedicated floor space of approximately 10,000 square feet are offering expanded grocery items.
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.
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