Target Corporation (TGT) recently unveiled its plan of opening a CityTarget store at the Beverly Connection in Los Angeles, California, spanning across 99,000 square-feet. The new store is slated to be opened in March 2013 and it will be the third CityTarget in the Los Angeles area. It will employ approximately 200 associates and serve as a one-shop destination.
The other two small-format locations are scheduled to be opened in 2012, one in Westwood Market Place in Westwood, California, in July, and another at Figueroa in Los Angeles in October.
Target, which currently operates 58 outlets in Los Angeles, also plans to open four smaller format stores, one each in Chicago, Seattle and San Francisco in 2012 and the fourth one in Portland in 2013.
In order to tap the urban markets where real estate remains a constraint, Target introduced CityTarget stores. The company informed that the new stores will vary in size from 60,000 to 100,000 square feet compared with its typical format of 125,000–180,000 square feet.
Earlier, Target used to concentrate on the suitability of its large-format stores for a particular location, which lowers its accessibility to the country’s thickly populated and space-crunched urban regions. However, with the changing business scenario and rising competition, Target felt the need to have stores of various sizes and formats to align with the targeted area. We believe that the approach will help the company to augment its sales.
Target is persistently trying every means to keep afloat in this sluggish economic environment. The company’s P-fresh remodel program, 5% REDcard Rewards program, City Target stores, The Shops at Target initiatives and its foray into the foreign market are its arsenal to safeguard itself from any unprecedented events.
Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy, and new merchandise assortments should drive comparable-store sales and operating margins in the long term. We expect the company to gain market share, and believe that more focus on consumable items should boost sales and earnings in a sluggish consumer environment. The company’s long-term objective is to attain $100 billion or more in sales and $8.00 or more in earnings per share by 2017.
The economy has not yet recovered fully. It is evident that the company’s customers remain sensitive to macro-economic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may affect their discretionary spending, and in turn curtail the company’s growth and profitability.
Moreover, a greater concentration of the company’s revenue generating capabilities in limited regions of the United States poses a competitive threat to Target, compared with Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), which are geographically diverse and more resourceful.
Consequently, Target is focusing more on store renovations and improving store sales productivity. Further, with the ever changing consumer preferences, the company feels the need to adapt to the demands of time and consider consumer-oriented strategies.
In separate news, as reported by The Wall Street Journal, Target will no more sell Kindle e-reader and other products of Amazon.com Inc. (AMZN). The decision came on the heels of heightened competition between online retailers and brick and mortar outlets.
The online retailers are gradually encompassing new merchandise categories under their purview and offering huge discounts on products with shipping services to attract customers, thereby threatening brick and mortar sales. The move is also seen as a part of Target’s strategy to fill its shelf space with more Apple Inc. (AAPL) products.
Currently, we maintain our long-term Neutral recommendation on the stock. Moreover, Target retains a Zacks #3 Rank that translates into a short-term Hold rating.
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