Target Corporation (TGT), an operator of general merchandise and food discount stores in the United States, recently announced its plan of further remodeling 30 general merchandise locations by October this year. The current program is in line with the last of three cycles of remodels this year covering an area from Cincinnati, Ohio to Jacksonville, Fla. and Nashville, Tenn.
The remodeled stores are expected to offer an expanded food layout along with greater assortment of dry dairy and frozen items, improved store layout and enhanced in-store shopping experience across departments, such as apparel, home, beauty, shoes and baby. Currently, about 1,100 stores with a dedicated floor space of approximately 10,000 square feet are offering expanded grocery items.
After the completion of this remodeling program, Target customers will enjoy a wide range of national food brands, along with Target owned brands like Archer Farms premium foods, Market Pantry value staples and meal options and Sutton & Dodge premium quality USDA Choice beef.
Target’s efficient marketing, multi-channel strategy, product innovation, compelling pricing strategy, and new merchandise assortments are expected to drive comparable-store sales and operating margins in the long term. We expect the company to gain market share, and believe that more focus on consumable items should boost sales and earnings in the coming quarters.
However, a greater concentration of the company’s revenue generating capabilities in limited regions of the United States poses a competitive threat to Target, compared with Wal-Mart Stores Inc. (WMT) and Costco Wholesale Corporation (COST), which are geographically diverse and more resourceful.
Consequently, Target is focusing more on store renovations and improving store sales productivity. Further, with the ever-changing consumer preferences, the company feels the need to adapt to the demands of time and consider consumer-oriented strategies.
Currently, Target carries a Zacks #3 Rank implying short-term Hold rating for the next 1-3 months and this correlates with our long-term Neutral recommendation.
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