Convenience to Lure You In

Yashu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

When markets seem to lack direction, the retail sector can be one of the safer investments to get into. I’ve been bullish on a particular retailer for quite some time now. This retailer is constantly trying to lure its customers by discounts and infusing innovations in retailing. Target (NYSE: TGT) has understood that “CONVENIENCE” is the need of the day. The company has unveiled different initiatives that allow you to conveniently buy the perfect gift this holiday season for your children and loved ones.

A Different Perspective…       

Target has shifted its focus toward advertising and selling its products in a technologically innovative manner by encouraging customers’ use of smartphones in its stores. It intends to use QR codes in its stores that will allow shoppers to scan codes to purchase items with free shipping included. So if you want to buy anything from a Target store this holiday season, then all you need to do is use the QR code, buy the item, and have the item delivered to your doorstep!  The retailer is betting on this free-shipping strategy to help combat online rivals.

This could be a good move ahead of the holiday season and help Target differentiate itself from its competitors including Wal-Mart (NYSE: WMT). It would be interesting to analyze things using historical perspective. Last year, Wal-Mart’s layaway push before Thanksgiving dealt a setback to Target’s sales. Target, unlike Wal-Mart, is not known to offer layaway, a mechanism which gives shoppers the ability to put goods on hold and pay over time. Instead, the company makes use of sales coupons, small discounts, and free shipping to lure customers in its stores.

Hurdles Huddling Along…

September hasn’t been particularly good for Target’s stock price. The company recently posted a 2.1 percent increase in comparable stores sales for the month of September; however, the numbers aren’t great when compared to its peers. Discount retailer Costco Wholesale (NASDAQ: COST) witnessed growth of 6 percent in comparable store sales for September, helped mainly by higher gasoline prices and stronger dollar.

Target’s price has also been affected because of some recent developments outside the company. Minneapolis based company Minnetonka Moccasins has sued Target for trademark infringement. The company claims that Target copied its iconic “Thunderbird” design, a small, beaded bird on the shoe’s toe.

Target will be looking to overcome these hurdles and emerge as an outperformer this holiday season.

Game Plans…

One thing Target isn’t planning is aggressive price cuts. Its officials have said that they have no plans to have a race to-the-thinnest-margins game with rivals. But Target and most other retailers will look to do some bulk seasonal hiring. The company plans to hire around 80,000 to 90,000 seasonal workers this year, which is a bit lower than last year, mainly because the company kept around one-third of the seasonal workers hired in 2011 as permanent staff. Kohl’s (NYSE: KSS) also looks to do some serious business this holiday season. It plans to hire around 52,700 seasonal workers, a 10 percent increase in hiring from last year. Kohl’s is also expecting an increase in online shopping because more than 10 percent of new workers are expected to work at the company’s distribution centers.

Concluding Thoughts…

Trying to stand out, this new innovation could certainly help Target differentiate itself from the bulk of its peers. Target remains a bright spot in the retail industry. Its current dividend yield of 2.3 percent certainly looks quite attractive and the stock has potential for price appreciation if this holiday season turns out to be a blockbuster for the retailer.  With holiday season on the way, and the stock sitting at interesting valuations, Target seems an interesting stock to look out for in the coming months.

yashup 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.

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