Financial Case Study of Target
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Target is the second largest general retailer in the United States, operating 1,740 stores in 49 states, including 251 SuperTarget stores that include grocery sections. Target is also a major online retailer through target.com and has major distribution centers in four different cities. Target also has a credit card services that adds to their revenue.
Target has made themselves known for “cheap chic”. Their major competitor is Wal-Mart, however more people go to Target to purchase clothing. Even though they are very similar, Target is perceived to be higher end. Another competitor is Costco, which is a membership warehouse giant.
Target has managed to keep their retail operations inside the domestic United States and has been able to focus their merchandise buying to this particular geographical area. Target plans on opening 100 to 50 stores in Canada by 2014. Whereas its competitor ,Wal-Mart, currently has stores all over the world.
There is minimum risk involved with investing in Target. Currently the common stock is priced at $47.95. Compared to Wal-Mart priced at $53.55 and Costco at $79.00. The dividend yield for Target is 1.92%, which is higher then Wal-Mart and Costco. Target currently has a higher dividend yield then its competitors but that is primarily due to the poor performance of Targets common stock over the last 52 week period. Costco and Wal-Mart have traded constantly at higher levels over the last 52 week period then Target has.
Although the stock is currently trading at lower levels, the stock has been a constant performer over the years. It has one of the leading names in retail today with sound financials; therefore it is not a risky investment. Target stock has outperformed Wal-Mart over a 10 and 5 year period.
Profit Margin
2008: 2.44%
2009: 2.85%
2010: 3.43%
With an increase of profit margin over the past 3 years this means that Target has had an increase in earnings but also have kept costs under control. Targets Revenues have steadily increased as well as net income from 369M to 535M. This has kept the profit margin increasing.
Net Income
2008: 2,214,000,000
2009: 2,488,000,000
2010: 2,920,000,000
Net Income has increased over the past three years. 2008 Target struggled because of the economy. In the third quarter of 2008, Target repurchased about 2.5 million shares of its common stock at approximately $55 a share. In 2010 there was a 29% increase in the first quarter due to the improvement in its credit-card business and higher sales of more profitable items such as clothing.
Revenue
2008: 64,948,000,000
2009: 65,357,000,000
2010: 67,390,000,000
Revenue has increased throughout the years because of how the economy is coming back and the improvements of products like clothing and credit card sales have increased revenue.
Return on Assets
2008: 5.1%
2009: 5.5%
2010: 6.6%
The net income increased from 2008 to 2010 as Targets asset decreased. From 2009 to 2010 their assets decreased approximately $800 dollars which made their return on assets greater because of the big increase in net income.
Gross Profit
2008:31%
2009:30.54%
2010:30.31%