http://www.fool.com/investing/general/2014/05/13/tjx-succeeds-where-target-struggles.aspx
By Eric Novinson
Fool.com
May 13, 2014
Shares of Target (NYSE: TGT ) fell by about 3% on Monday May 5, 2014 after
the big-box retailer announced that Greg Steinhafel would no longer head
up the company as its CEO. This move marked the second high-profile
departure related to the data breach at the retailer, as CIO Beth Jacob
left the company back in March. However, the data breach just added to the
problems that Steinhafel faced at Target. A problematic expansion push
into Canada and competition from other retailers have also hit Target's
results. As a result of this, Target posted mixed results for the fourth
quarter while its competitor TJX (NYSE: TJX ) posted much stronger results
for the period.
Target's recent results
Target ended 2013 on a weak note, both domestically and in Canada. In its
last earnings report, Target announced that its fourth-quarter sales fell
3.8%, although full-year sales still showed a small rise of 0.9%. Target's
gross margin for the quarter in its domestic operations also narrowed from
27.8% to 27.6% year-over-year, although the full-year gross margin
actually showed a minor gain rising from 29.7% to 29.8%. With the heavy
price promotions going on at many retailers during the 2013 holiday
season, this actually looks impressive as Target did not take a huge hit
to its margins for the period.
These figures show that even though the last quarter of 2013 didn't go too
well for Target, it wasn't a total catastrophe as the retailer still
managed to show small gains on two important metrics for the year.
Target's diluted earnings per share fell more sharply for the year from
$4.52 to $3.07, although most of this stemmed from the $1.13 per share
impact of Target's Canada push. However, the retailer still retains some
powerful competitive advantages.
The case for Target
Target sells competitively priced but attractive clothing, appliances,
household decorations, food, and many other things. While it doesn't
always have the inventory selection of a category killer, it usually has
an inexpensive item available to satisfy most needs. The company can use
price competition to beat higher-end retailers, and its design and fashion
appeal can help it beat deep discounters. In addition, the company has
also expanded its food lineup by adding fresh groceries. Wal-Mart and the
dollar stores also see fresh groceries as a promising growth area. Target
also has international expansion potential, even if its Canadian launch
didn't work out as well as it expected. Also, Target isn't the only
discounter that's lost data to a hack.
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