Target’s Remodeled Stores & 5% REDcard Rewards Drive Growth

Target Corporation (NYSE:TGT) reported strong revenues for Q2 2012. According to Target’s CEO Gregg Steinhafel, Target experienced  same-store sales increase of 3.9% this quarter which is its strongest performance in last 4 years, and it reflects the continued relevance of the merchandising strategies along with the growing impact of its remodel program and 5% REDcard Rewards. Target is the second largest retailer in the U.S. after Wal-Mart (NYSE:WMT) competes mainly with Best Buy (NYSE:BBY), Macy’s (NYSE:M), Sears (NASDAQ:SHLD), and Costco (NASDAQ:COST).

We have $58 price estimate for Target’s stock, implying a premium to the market price.

Store Remodeling Strategy

The remodeled stores provide a fresh environment for customers with enhanced visual elements and category transformations across the sales floor. According to Target, customers liked these remodeled stores leading to increased customer visits and spending.

In Q2 2012, Target completed an unprecedented 180 remodel projects. According to company officials, in past, this would have taken approximately 3 years to complete. It expects to deliver approximately 140 more remodels by the end of Q3 this year.

5% REDcard Rewards Loyalty Initiative

Target started this strategy in October 2010, which enables customers to pay with Target branded credit and debit cards. Customers have responded favorably to the 5% REDcard Rewards loyalty initiative. The program has driven customer traffic, sales and guest loyalty at Target stores amidst the shaky economic environment.

These strategies have proved successful for Target so far and helped it to report impressive numbers. As Target is heavily dependent on US consumers, we believe these types of strategies will play a crucial part in Target’s future growth.

See our full analysis and $58 price estimate for Target stock here