In this file:
· Target’s Innovation Continues to Drive Value
· Target's Plan to Become Indispensable to Shoppers
· Target Declares Share Buyback Plan: What Else You Should Know
Target’s Innovation Continues to Drive Value
David Trainer, Contributor, Forbes
Sep 18, 2019
Target Corporation’s (TGT) stock gained 20% on August 22 after the company beat expectations for earnings and revenue and raised its guidance for the rest of 2019.
This strong quarter reaffirms my belief that Target can continue to grow and create value for shareholders by innovating the retail experience. The retail giant continues to adapt to the changing industry through omnichannel delivery options, store redesigns, small store formats, and, most recently, a partnership with Disney (DIS). Target Corporation is this week’s Long Idea.
Growth and Margin Expansion at the Same Time
I selected Target as a Long Idea on June 5, 2019 in my article “This Retail Giant Is Firing on All Cylinders”. At the time, I was bullish on the company’s solid revenue and profit growth. Specifically, I singled out Target’s e-commerce efforts, which included traditional delivery, in-store and curbside pickup, and same-day delivery through its acquisition of Shipt.
One question I received from readers was “Is there a concern that margins will face pressure as the total share grows to more e-commerce?” It’s a fair question. After all, it seems like the costs of these e-commerce efforts, especially same-day delivery, would likely offset some of the growth they deliver.
Target’s Q2 earnings highlight the company’s ability to overcome these challenges. Target delivered solid growth – comparable sales up 4.1% year-over-year (YoY) and total sales up 4.3% through the first six months of 2019 – with margin expansion at the same time. Figure 1 shows that revenue through the first six months of the year grew faster than every major expense – cost of goods sold, selling, general, and administrative (SG&A), and depreciation and amortization (D&A).
Target’s revenue growth rate has outpaced expenses despite the fact that digitally originated sales rose from 5% of revenue in the first half of 2018 to 7% in the first half of 2019. Same-day fulfillment services – which include curbside pickup, in-store pickup, and Shipt – doubled year-over-year.
As management noted in the Q2 earnings call, digital fulfillment costs provided ~30 basis point headwind to Target’s gross margin in the quarter. This headwind was more than offset, though, by improving efficiencies on the merchandising side, price increases, and a favorable shift to higher margin apparel products.
The company’s strong performance is especially notable given that it comes on the back of an especially strong first half of 2018, where comparable sales grew by 4.8%. Over the past two years, comparable sales have grown by nearly 10%.
Taken as a whole, this earnings report demonstrates that Target doesn’t need to sacrifice margins in order to capitalize on e-commerce and grow its business.
New Store Formats Drive Growth ...
Disney Partnership Is a Slam Dunk ...
Management Focused on the Right Metrics ...
Reduced Tariff Threat Is a Positive ...
Target Remains Undervalued ...
Cheap Valuation Provides Upside ...
Potential for Dividend Growth is Strong ...
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Target's Plan to Become Indispensable to Shoppers
Retail locations are still the heart of its strategy.
Travis Hoium, The Motley Fool
Sep 18, 2019
One of the reasons Amazon.com (NASDAQ:AMZN) has been so successful disrupting retail is that few retailers had any lasting loyalty from consumers. Target (NYSE:TGT) and Walmart (NYSE:WMT) were convenient, and shoppers may have had preferences between the two, but there wasn't a loyalty program or ecosystem of offerings that made a retailer "sticky" for consumers.
Target is trying to change that with a variety of new offerings. There's the loyalty program called Target Circle, which has been added to Drive Up, the Target Red Card, and an app that allows for shopping online and discounts in-store. Together, they may make Target as sticky a brick-and-mortar retailer as Amazon's Prime has been in e-commerce.
Building loyalty one step at a time
Amazon has built loyalty with customers using Prime as a big, sweeping program that brings fast shipping, streaming TV, free photo storage, and more under one umbrella. Target is trying to build loyalty with a number of different packages that are built around the store.
Target Circle is the company's new loyalty program that earns customers 1% savings on purchases at Target, plus regular coupon deals in the Target app and a 5% off shopping trip on your birthday. The program will launch Oct. 6, and Target hopes it'll help the company to engage more with consumers.
The Red Card has long been a big selling point for Target regulars, bringing 5% savings on every purchase. The card will automatically enroll users in Target Circle, but it's a big selling point for going to Target stores if you have a card.
Another great addition for customer loyalty has been Drive Up, which allows you to order online and simply pull into a designated parking spot at a Target store and have your order delivered to your car. For consumers on the go or parents who don't want the hassle of bringing the kids into the store, this is a big benefit. And there's only a short wait until your order is ready, not two days to get items shipped.
Target is trying to make shopping at its stores easier, and Target Circle, Red Card, and Drive Up are big reasons to be frequent users. But there could be more features on the way given the company's move to sending products to people's homes from its stores.
The missing item ...
Keeping up with the changing times ...
Target Declares Share Buyback Plan: What Else You Should Know
Zacks Equity Research
September 20, 2019
In an attempt to boost shareholder value, Target Corporation’s (TGT - Free Report) board of directors authorized a new repurchase program worth up to $5 billion. The company will initiate repurchasing of shares under the new program, upon completing the existing $5 billion buyback plan, which is likely to take place in fiscal 2020. At its last earnings call, Target notified that it still had approximately $1 billion remaining under its current authorization.
In addition, Target declared a quarterly dividend of 66 cents per share. The dividend is payable on Dec 10, 2019 to shareholders of record as on Nov 20, 2019.
We appreciate Target’s efforts to consistently enhance long-term shareholder value. The company’s healthy cash flow generation capability and efficient capital allocation provides it with ample liquidity to return excess cash to its shareholders. During the second quarter of fiscal 2019, Target repurchased shares worth $341 million and paid out dividends of $328 million.
Notably, the company hiked its quarterly dividend by 3.1% in June 2019. People looking for regular income from stocks are most likely to choose companies that have a track record of consistent and incremental dividend payouts.
Things You Ought to Know ...
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