Target’s $62 Fair Value: Web Sales And Margins In Focus For Earnings
Target (NYSE:TGT), the second largest discount chain retailer in the U.S., is scheduled to announce its Q1 fiscal 2012 earnings on May 16. The retailer recently disclosed its Q1 sales figures with a 5.3% increase in comparable store sales and 2.1% increase in net sales compared to the same period last year. [1]
With the sales results already disclosed, we expect Target’s margins and online sales initiatives to be the prime focus on Wednesday. In the past, it introduced a series of initiatives to boost online sales. Recently it announced that it will phase out Amazon’s (NASDAQ:AMZN) Kindle at its stores and on its website. Target mainly competes with Wal-Mart (NYSE:WMT) and other retailers like Best Buy (NYSE:BBY), Macy’s (NYSE:M), Sears (NASDAQ:SHLD), and Costco (NASDAQ:COST).
See our complete analysis for Target here
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Investors will be interested to know how Target aims to remain competitive against online retailers like Amazon and eBay (NASDAQ:EBAY), who are the undisputed leaders in terms of pricing and product offerings. Early this year, Target sent a letter to its vendors asking to create special products that would shield it from price comparisons from online retailers. Target, like other retailers, is working hard to fight showrooming – i.e. a shopper comes into a store to see a product and later buys it from an online retailer. Target has also announced plans to create mini shops of Apple (NASDAQ:AAPL) products in 25 of its stores this year.
Margins Remain in Focus
Target’s 5% Rewards loyalty program and REDcard Free Shipping have helped the retailer drive traffic and boost sales. However, these discount programs do impact the margins. In a conference earlier, the company management asserted that it expects these strategies to impact its gross margins for 2012. Investors will be interested to know how Target tackled margin pressure this quarter.
The recent government data on jobs and housing is disappointing and has raised concerns that the economy could face a slowdown for the third straight year. This would make it difficult for retailers like Target to fend off margin pressures.
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Notes:- Target Reports Strong First-Quarter Sales, Company Website [↩]