Here’s Why Target Is Using Soccer To Promote Its Products
Recently, Target (NYSE:TGT) announced a series of initiatives that will make it one of the largest supporters of soccer in the U.S. The company is now the official partner of Major League Soccer (MLS) after it signed a multi-year deal that includes airtime during MLS broadcasts on Univision, FOX Sports and ESPN, opportunities for in-stadium experiences, player experiences and ownership of certain major MLS platforms. In addition to the MLS sponsorship, Target will also become an official partner of Minnesota United FC. The company is also committing to further youth soccer’s growth in the U.S. It is rare for a retailer to sponsor a sports team and this is a first for Target. However, it appears that the company is looking to leverage the growing popularity of soccer in the U.S., which fits well with its sporting goods category. Target’s management stated that soccer is popular with Hispanics, which is a key demographic segment for the company. As soccer gains popularity in the U.S., the MLS has a promising future ahead. In 2015, MLS averaged 21,574 fans per game which was nearly 13% higher from the previous year and higher than NBA or NHL. Younger audiences in the U.S. are drawn to soccer and international events are witnessing high viewership. The number of Americans playing soccer is also increasing over the years with 15.8 million players in the spring of 2016. This gives Target a growing platform to market its products and connect with the younger consumers where this sport is more popular.
As the company struggles to grow revenues, it is looking at innovative marketing techniques to draw attention to its brand. The soccer push appears to be a part of this strategy. According to our estimates, Target’s average revenue per square foot is likely to increase steadily from around $302 in 2017 to nearly $320 by the end of our forecast period.
This metric is a key value driver for the company and its valuation is sensitive to changes in this metric. For example if the company is not able to grow its revenue per square foot and it remains stagnant at around $300 over our forecast period, there can be a nearly 10% downside to our price estimate.
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The sports push can increase Target’s visibility in the demographic it is targeting – young families and multicultural communities. However, the company faces growth challenges with stiff competition from online retailers and players such as Walmart. It is working on several other initiatives such as a renewed focus on groceries and experimenting with smaller format stores to drive sales. Whether the sports push will result in a significant increase in Target’s sales remains to be seen.
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