Could This Retailer Double?
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I'm at Target on a Saturday night at 8:30 pm. Do I have a life? No, and apparently neither do a lot of people. The parking lot is full and there are shoppers, lots of them. The nice Verizon lady told me I need a widget to get Wi-Fi upstairs. “Don't let them upsell you,” she cautions.
I have less than half an hour to get this widget and I ask an associate at Target. She hits a button and the electronics dude is there within 30 seconds just as the button promises. One minute later, said widget is in my hot little hands and he promises if it doesn't work just bring it back. No upselling. It works great and is $25.00 cheaper than at Staples. Thank you, nice Target dude.
What's Hot at Target
I was impressed with the customer service and the prices. I occasionally shop there but last Saturday night inspired me to dig deeper into Target (NYSE: TGT), the stock. It's near a 52 week high, again. It's attracting not just the family shoppers but it's also been aggressively targeting the fashionistas.
In the past they have featured famous designers like Alexander McQueen and Isaac Mizrahi. Last year, fashions by Italian designer Missoni (they still look like an afghan my aunt knitted) sold out in the stores within hours with lines around the block and the website crashed several times that same day. Soon, they'll be featuring designs by Prabal Gurung. The First Lady has worn his gowns to events and his show is considered the hottest ticket at New York Fashion Week.
On September 9 through October 20 Target made available The Shops at Target Collection featuring New York fashion designer Kirna Zabete, Odin Menswear and home accessories from Patch NYC and the Curiosity Shoppe.
When that promotion ends Target is in a special collaboration with Neiman-Marcus for the holidays featuring 24 of the most highly regarded fashion designers like Judith Lieber, Oscar de la Renta, Marc Jacobs and Diane von Furstenberg as well as some of the hottest ones like Tory Burch, Rag & Bone and Alice+Olivia.
Target is no slouch when it comes to trends. Urban dwellers had been Target-deprived but New York City, San Francisco, Chicago, Seattle, Los Angeles and Portland, Oregon already have or will have by October their own City Target stores, small format stores in multi-level landmark buildings. The stores will have most of the same merchandise as the larger suburban stores with the exception of bulkier items impractical for apartment living. They will also carry exclusive designer collections and on-trend fashions.
Targeting the Competition
Target and Wal-Mart both have yields of 2.20% but Wal-Mart has a slightly higher P/E of 15.62 to Target's 14.75. The industry average is 20.68 and Costco's P/E is outsized by comparison at 28.17.
For years Target has been trying to dispel the assumption that its merchandise is 'pricier' than those of its competitors. Their mission as mentioned in the 2011 annual report has always been to 'offer quality merchandise at a discount'. I think they've gone one step further by offering special items by popular manufacturers only available at Target, from this year's candy corn Oreos to special high-fashion collections at unbelievable prices. That you can't get at Wal-Mart. The 'designer for Target' products are substantially cheaper than the designers' usual prices. Even mini-fashionistas aren't left out with Harajuku (a Japanese street art inspired line of fashions) for girls and Shaun White clothing for boys.
Target To Double?
In that same 2011 annual report it stated their mission was to increase sales to $100 billion or more and to grow EPS to $8.00 per share by 2017. That would be almost a double with today's EPS at $4.36. To that end, they are opening 100-150 stores in Canada by 2013 and more City Target stores as time goes on and have been expanding the fresh food and grocery sections to more than half the Target stores.
Like Macy's 'localization' strategy that has worked so well for them, Target is tailoring offerings to local tastes. As the annual report says they'll carry what the people want, “whether that's Goya black beans in Miami or an extended assortment of winter coats in Minnesota.”
In an unusual collaborative move Target, Wal-Mart and Best Buy are teaming up on their own mobile payment consortium— MCX (Merchant Customer Exchange). Look out Pay Pal and Google Wallet.
With all these initiatives can Target double that EPS by 2017? They report on November 15 and we should hear about progress on that front. It's already planning on a big holiday season from Black Friday on. They had a huge back-to-school push as well. By luring in families, fashionistas and bargain hunters (like me) Target seems to have all the bases covered.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Costco Wholesale. Motley Fool newsletter services recommend Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.