Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, recently notified that it will open 10 new stores across the country on October 10, 2010, which will help generate more than 2,400 jobs.
 
The stores will be opened in Sacramento, Simi Valley, Bakersfield, San Jose and Azusa – all in California; Salt Lake City, Utah; Little Rock, Arkansas; Christiana, Delaware; Flushing, New York; and Braintree, Massachusetts.
 
Target hinted that the new stores will feature expanded grocery offerings, including fresh produce, meat and baked goods, improved store layout and enhanced in-store shopping experience across departments such as beauty, home, pharmacy, shoes and electronics, with an aim to increase traffic.
 
The company informed that the stores will host an extensive range of national brands and will also carry the company’s own brands such as Archer Farms, Market Pantry and Merona.
 
We observe that the greater concentration of the company’s revenue generating capability in few regions of the United States poses a competitive threat to Target compared to Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), who are geographically more diverse and resourceful. Moreover, Target’s success rides on the stability of these regions.
 
We believe, the opening of new stores outside the United States will definitely boost the company’s top and bottom lines and improve cash flow generation.
 
We believe that Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing, and new merchandise assortments should help 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 consumables should boost sales and earnings in a sluggish environment.
 
Currently, we have a Neutral rating on Target, which operates 1,743 stores in 49 states. Moreover, the Zacks #3 Rank, which translates into a short-term ‘Hold’ rating, correlates with our long-term recommendation.
 
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