I would like to think that even those who loathe Wal-Mart
Yet here we have Target
Now, it's not like current results aren't good. Revenue was up more than 11% in the fourth quarter as the company saw same-store sales rise 4.2% (on top of a 5.4% rise last year). Gross margins improved very slightly, and earnings from continuing operations rose 14%. Further, cash flow improved whether or not you opt to make any adjustments in cap-ex to separate "growth cap-ex" from "maintenance cap-ex."
So how do I think Target can do better? Three ways, mostly.
First, I think the company could improve its margins by doing more direct sourcing (i.e., bypassing wholesalers and distributors) for its stores. Second, I think the company can continue to roll out more private-label merchandise. Target generally attracts a more affluent customer base than Wal-Mart, and Target could reap better margins from that with the right sort of private-label products. Last and not least, I think the company could do more with the Internet as a sales channel.
In the meantime, Target still has plenty of potential just in stealing away more grocery business from the likes of Kroger
Couple that potential with today's price, and you'd seem to have a stock that still has some upside to it.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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