Target CorporationTGT

Morningstar Rating

Stock Research and Analysis

by Kimberly Picciola

The economic downturn is taking its toll on Target given the discretionary nature of much of its merchandise (roughly 60% of its sales). Although sales are likely to rebound once economic conditions subside and consumer confidence returns, we think Read more

Bulls Say

Target has done a nice job of carving out a sizable and profitable retail niche for itself, and its fashion-forward sense in apparel and home decor should continue to resonate with value-conscious consumers.

Exclusive housewares and clothing lines, along with brands from other well-regarded consumer product companies, differentiate Target stores from the competition.

We think that management is taking the appropriate steps in this environment, such as scaling back new store openings and pausing its stock repurchases in order to maximize free cash flows.

Despite carrying a substantial amount of debt on its balance sheet, we believe that Target has the financial strength to make it through this recession without compromising its long-term strategy. Read more

Bears Say

The discount retailing world has room for both Target and Wal-Mart WMT, but Target's push into consumables could bring the two companies into even closer competition.

While increasingly mitigated by a higher mix of consumables, Target's focus on discretionary softlines still exposes the company to economic weakness.

Target has historically done a good job of managing its credit card portfolio, but the business has been a drag on the bottom line amid the difficult economic environment.

With nearly 1,800 stores, Target's growth prospects are waning. Read more

Strategy

Differentiation from the competition through store experience and product selection is key to Target's strategy, and the firm is trying to drive store visits by offering more food and consumables. Target Read more

Management

President and CEO Gregg Steinhafel took over from Robert Ulrich as CEO in 2008 and was named chairman in 2009. Steinhafel has held many positions within Target since joining the firm in 1979, and we haven't seen any major directional changes under his Read more

Profile

Target operates large-format discount stores that sell name-brand and private-label family apparel, home decor items, food, and everyday consumables. It operates more than Read more

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