Here are some of the reasons that you should own the stock before the end of fiscal 2012.
Better late than never
Target reported second-quarter earnings per share of $1.06, which topped analysts' estimates for $1.01 per share. Same-store sales in the quarter climbed 3.1% from the year-ago period. While the comps were no match for Target's first-quarter results in which same-store sales grew 5.3%, to more than six-year highs, the latest figures are impressive nonetheless.
Management now expects net income of $4.40 a share for fiscal 2012. That's a notable improvement from earlier projections for full-year profits of $4.30 per share. I'm confident that Target can hit its mark at the end of the year.
In its latest quarter, the retailer was able to drive more traffic to its stores by offering everyday items including fresh food. Target pushed into the grocery segment behind rival Wal-Mart in hopes of presenting itself as a one-stop shop. So far that initiative is paying off.
Still, expanding into groceries is somewhat of a balancing act for retailers like Target. The profit margins on perishables are less rewarding than those of bigger ticket items such as electronics. Fortunately, Target has more than a few growth strategies in play today that should help offset margin declines in the quarters to come.
Movin' on up
The most anticipated of these is the company's slated move into the Canadian market in the next two years. Starting in early 2013, Target plans to open 125 to 135 retail stores in the Great White North. The move marks a first for Target, which currently operates only in the United States. This is especially encouraging as there are plenty of other overseas markets for the company to grow into down the road.
As the second largest discount retailer in the U.S. after Wal-Mart, Target continues to get ahead with smart initiatives and strategic partnerships. Unlike other big-box retailers such as Best Buy
Expect more. Pay less.
Target isn't taking the issue lightly. For example, the retailer has ongoing deals with world-renowned designers to bring limited-edition collections into its stores. The tactic has so far proved successful, with affordable one-of-a-kind merchandise from fashion stars like Missoni and Jason Wu selling out in a matter of hours. Target stretched this concept to include upscale devices, with its store-within-a-store format.
Best Buy used a similar tactic to combat so-called showrooming by setting up mini-Apple
Target is winning by creating actual value for its customers. And in the next three years I expect that value to significantly reward shareholders as well. Of course there are still risks, namely in the e-commerce space. Amazon.com
On demand = in demand
A personal eBay shopping app, eBay Now, currently offers same-day delivery to customers in San Francisco. Not to mention, the new service from eBay comes with free delivery on users' first three purchases. Meanwhile, Amazon Prime members receive similar same-day perks with only a $3.99 surcharge per delivery. Yet, there's an important distinction between the two services.
The eBay Now platform works with local retailers including Target , whereas Amazon processes orders independently of other merchants. By cooperating with eBay to provide this service Target is able to reach more online shoppers than it would otherwise. While eBay Now is still in the early stages of development, Target's involvement provides further support that its head is in the right place.
A don't-miss opportunity
Despite increased competition from online retailers, Target is proving it has staying power by providing customers with unique in-store experiences. As a consumer, I know I can get items at Target that I won't find elsewhere online. And it's those thoughtful details that make the difference in a shopper's purchase decision. For these reasons, I think Target will continue to reward shareholders for years to come.
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