Target Corp. has a big goal ahead: revenues of over $100 billionwithin the next six or seven years.
The discount chain plans toachieve the goal by growing further in the U.S. and also expandingrapidly in Canada. Target also expects to double earnings per sharewithin that time frame. The retailer had total sales of $65.8 billion infiscal 2010.
The aggressive expansion comes as Target’s rival,Wal-Mart Stores Inc., is struggling to right its U.S. stores division,which is seeing comparable-store sales decline. Wal-Mart’s same-storesales fell 1.8 percent in the fourth quarter, their seventh straightdecline.
Target revealed the goal as it reported net income of$1.04 billion, or $1.45 a diluted share, for the fourth quarter endedJan. 29, 10.6 percent above the $936 million, or $1.24, recorded in the2009 quarter. EPS were 5 cents above the $1.40 expected, on average, byanalysts polled by Yahoo Finance.
Same-store sales at Targetadvanced 2.4 percent.
Target’s fourth-quarter gross margin ratewas 28.7 percent, down from 29.1 percent in 2009, due to the impact ofits PFresh remodel program, and RedCard initiative. EPS also benefitedfrom a $2.5 billion share repurchase program. Sales rose 2.8 percent,to$20.28 billion from $19.72 billion. The increase in total revenueswasslightly lower, 2.4 percent to $20.66 billion, because of a 17percentdecline in credit card revenues, to $384 million.
Forthe fullyear, net income jumped 17.4 percent to $2.92 billion, or $4 adilutedshare, from $2.49 billion, or $3.30 a share. Sales moved up3.7 percentto $65.79 billion from $63.44 billion while comps advanced2.1 percent.Gross margin was unchanged year-on-year at 30.5 percent ofsales.
Investorsreacted to the results by pushing up shares ofTarget $1.74, or 3.5percent, to $52 as an afternoon rally lifted theS&P Retail Index4.12 points, or 0.8 percent, to 510.39.
Targetplans to roll outthe PFresh expanded food format to 380 stores thisyear. About 340 unitsreceived the PFresh format in 2010.
TheRedCard, launchednationally in October, gives a 5 percent discount onmost Targetpurchases. Profits for the credit card segment were $541million in2010, from $201 million in 2009. “Beyond the profit itgenerates forTarget,” said Gregg Steinhafel, chairman, president, andchief executiveofficer of Target Corp., “[the RedCard] is deepeningour relationshipwith our best guests, who shop more often and spendmore. The RedCardwill continue to deliver incremental sales in 2011.”
Targetin2013 and 2014 will open 100 to 150 stores in Canada, a result ofits$1.85 billion Zellers acquisition. Steinhafel predicted theCanadianunits will be a major factor in pushing its total sales toover $100billion in the next six to seven years.
Steinhafelsaidcomp-stores sales should rise 4 percent to 5 percent in 2011,whichprompted one analyst on the earnings call to question how theretailercan be so confident in this economy. “We’re confident that thetwosales-building strategies, PFresh and the RedCard, are working,”saidDouglas A. Scovanner, executive vice president and chief financialofficer. In a rare show of solidarity with a competitor, he said, “Wejust saw that the largest player in the marketplace had another quarterof [declining comps]. I think a lot of people are picking on my bigbrother. It’s much more of what’s happening in the macro-economy and notanalyzing [Wal-Mart’s] stumbles and the challenges they have and howthey’re facing them.”
As for Target’s same-store salesprojections, “There’s an expectation of base performance remainingpositive that would get us to the 4 percent to 5 percent,” saidScovanner.
Steinhafel added that “the housing market is stillunhealthy and there are some strong early signs of inflation in apparel,home and food. Rising energy prices [could have] a dampening effect onthe broader economy. We have far less confidence in the underlyingbaseeconomy.”
Kathryn A. Tesija, executive vice president ofmerchandising, said Target will offer several limited time collectionsin 2011 including, in March, 34 dresses from Go International designersto commemorate the franchise’s fifth anniversary. A Calypso St. Barthlifestyle collection will bow in May featuring women’s apparel, jewelryand accessories, baby clothing and home furnishings. Sales have beenmore difficult in electronics and home, she said.
Mobile trafficrose three-fold in 2010 and accounted for 8 percent of online pageviews. The retailer expects to launch its own platform for target.com inthe third quarter, marking the end of its partnership with Amazon.com.“It will completely transform the online experience for guests,”Steinhafel said.
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