Positive Outlook for Target’s U.S. Store Revenues

Target Corporation (NYSE: TGT) is one of the top ten largest retailers in the U.S. by sales competing mainly with Wal-Mart (NYSE:WMT), Best Buy (NYSE:BBY), Macy’s (NYSE:M), Sears (NASDAQ:SHLD), and Costco (NASDAQ:COST). The recent economic environment has revealed that the firm is highly exposed to U.S. macro-economic trends that impact retail spending such as high rising energy prices, lower home values and downturns in the economy. Although Target positions itself as a “cheap chic” retailer, consumers are still cutting back on goods such as apparel and electronics, both of which play an important role in Target’s total sales.

We maintain a $64.60 price estimate for Target’s stock, roughly 20% above market price of $51.05.

Revenue per Square Foot from U.S. Stores Expected to Pick-up

Target’s revenue per square foot from its U.S. stores decreased from $295 in 2007 to $274 in 2009, due to decreasing comparable store sales growth partly attributable to weak consumer spending. However, factors like competitive pricing and initiatives like mobile coupons and mobile applications are likely to bolster Target’s revenues, going forward.

Target is the second largest retailer in the U.S. after Wal-Mart. While the retail giant uses its enormous size and buying power to put pressure on suppliers to sell goods at lower prices, the suppliers have an incentive to sell large volumes of goods. The company, in turn, passes on the savings to its customers.

Target recently rolled out a new program that sends coupons directly to the customer’s cell phone via a text message and a link attached. Customers need to scroll down to find the coupon, and then have the cashier scan the coupon from their phone. Mobile coupons ensure hassle-free shopping for consumers, and also helps Target increase store sales.

The company has also launched a bar code scanner for the iPhone and Android devices that scans product bar codes with the built-in camera to view item details, read reviews, or add to a list. Another service launched by Target is a Shopping List application for its Mobile Web platform, which enables users to get organized and shop more easily via a mobile device.

Given the above steps taken by Target to improve its U.S. stores sales, we pose the following question:

What is Target’s US Stores Contribution to Target’s Overall Stock Value?

A) 45%

C) 68%

C) 75%

D) 93%

Click a response above to see the answer

See our full analysis and $64.60 price estimate for Target.