In an effort to enhance the company’s financial flexibility, Target Corporation (TGT), the operator of general merchandise and food discount stores in the United States, recently entered into a new five-year credit conformity.
The move will not only help in achieving its objective, but will also facilitate the company to focus on future growth prospects.
The newly announced $2.25 billion credit facility is scheduled to expire on October 2016, overriding the previous $2 billion credit agreement, which was slated to expire on April 2012. Moreover, Target can amplify the credit facility by additional $500 million and can extend the same by two more years.
Target engaged Bank of America as the administrative agent, while Citibank is the syndication agent.
Target’s efficient marketing, multi-channel strategy, innovative product offering, compelling pricing strategy and new merchandise assortments are expected to drive comparable store sales and operating margins over the long term. We expect the company to gain market share, and believe that the focus on consumable items should boost sales and earnings amidst a sluggish consumer environment.
Target is currently emphasizing on store renovations, enhancing store sales productivity, introducing smaller format stores, and eyeing opportunities to expand in international markets.
Further, Target is targeting markets, such as Canadaand Latin America. The company plans to open 125 to 135 stores in Canadaby 2013. Moreover, these stores will offer a well-built preliminary underpinning for a more dynamic Target presence in Canadain due course.
Further, the move will fetch a market for the company, where cheap and trendy approach to retailing has been already qualified, as the retailer’s rivals, including Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), already boasts a presence in Canada.
Currently, we have a long-term ‘Neutral’ rating on the stock. Moreover, Target has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
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