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Target is a seller of general merchandise through a network of 1381 Target stores and 210 SuperTarget stores. Target is headquartered in Minneapolis,Minnesota and has been in business since 1902. Target operates on site pharmacies,vision centers and grocery centers throughout the U.S.
Target stock is currently trading at $54 dollars,a current PE of 16.4 and currently pays a dividend of 1% per share. Target is currently trading at a deep discount to its 52 week high of
nearly $71 dollars and the question we're going to try and answer is whether Target is a good buy now and will it ever get back to $70 range. I want to look at annual results for 2007 rather than quarterly results as annual results will take us through an entire business cycle.
Targets 2007 total sales increased by 6.5% to $63.367 billion from $59.4 billion for 2006. Target credited the increase in sales revenue to new store expansion, a 3% increase in same store sales and their credit card business(Which they sold a portion of for over $3billion recently). Earnings before EBIT( before interest and income taxes paid) increased by 4.0% to $5.3 billion for 2007. And heres where things get a little murky. EBIT earnings increased an anemic 1.3% and credit card operation EBIT grew by 18.9%. Another way to look at this report is EBT(Earnings before taxes) for 2007. EBT for 2007 was $4.6billion or an increase of $128 million over 2006. Targets credit card business,net of the allocated interest expense,netted Target $600 million,an increase of $106 million over 2006. So,if you deduct the $600 million attributed to the credit card business( Remember they sold at least part of this) Targets 2007 results would have been significantly lower.
If the economic slow down gets worse or even stays the same for 2008,Target may be under a cloud.Also,as their main competitor,Walmart,expands Target may be facing pressure there too. Walmart seems to be weathering the storm much better as WMTs stock is very near its 52 week high. If you look out a couple of years Target may regain some lost ground. but,as things stand today i think Walmart may be the better current investment!
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Comments (1)
Target seems a little more upscale than Walmart, from what I've heard - I have never been in a Target so I don't have any personal observations to rely on.
But in today's economy price which is Walmart's strong point could be more important than some ill defined upscale atmosphere.
Tom
Posted by Thomas Armistead | May 14, 2008 10:11 PM