Last September, the crazed consumer response to Target's Missoni for Target line served as a reminder of how exciting Target used to be. Target needs to get that mojo back on a more consistent basis. Recent rumors that Apple
Target's not in the dire shape Sears Holdings
Still, Target didn't really do much of anything at all in 2011; its share price reflects inertia, languishing by 11.4%. Compare that to Costco
Let's compare Target's metrics to those of several other discounters over the last 12 months.
Revenue Gain (loss) %
Earnings (loss) Per Share
Gross Profit Margin %
Source: S&P Capital IQ.
Target's results could have been worse, but they could have been better, too. The days when Target's cheap-chic flair gave it a sharp competitive advantage over Wal-Mart seem a bit more like a faded memory, even if Target retains an overall stronger brand reputation than Wal-Mart does.
Furthermore, Target may be a discounter, but its ability to woo more shoppers by lowering prices is hampered by the fact that Costco and Wal-Mart are both major players in that area. There's a reason that Costco's gross profit margin is so low (bolstering sales volume), and Wal-Mart's a force to contend with in any price war.
There's no reason to sell Target, but there's no incredibly compelling reason to buy its shares, either. Although Target's PEG ratio of 0.97 signals an undervalued stock, investors should wait for signs it's making more bull's-eyes when it comes to inciting excitement in shoppers.
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