Target TGT announced on Sunday that they would be opening dozens of Disney DIS stores within Target stores over the next year. The announcement is Target’s latest initiative to lure more customers in their doors.
Target posted strong second quarter earnings last week that sent its stock soaring to new record levels. The company was able to bring more people into their stores, and customers spent more per ticket during the quarter. Target shares have soared 59.3% YTD while Disney shares have gained 22.3%. Let’s take a more in depth look at how this partnership might bode for Disney and Target.
Is This a Landmark Deal?
As the busy holiday shopping season approaches, 25 Disney stores are set to open at certain Target locations on October 4th in major US cities like Philadelphia, Denver, and Chicago. Over the next year, an additional 40 stores are set to open. The Disney stores will sell toys, games, apparel, and more.
A Target store is also set to open at the Walt Disney World Resort in 2021. The strategic decision to open the stores just in time for the holiday season can potentially boost the two companies’ transactions. Target CEO Brian Cornell commented on their relationship with Disney, stating “Disney is among our largest and most admired relationships.” Cornel didn’t comment on how much Disney merchandise currently brings in sales for Target, or how much revenue he expects the new stores will generate.
The Toys R Us liquidation left a chunk of market share up for grabs and companies like Walmart WMT and Amazon AMZN have competed with Target and Disney for the market. Target has actively attempted to expand its presence in the toy industry. Ahead of 2018’s holiday season, Target added a quarter of a million square feet of space dedicated to toys in more than 500 of their stores. The company reported in its 2018 holiday results that same-store sales went up 5.7% and cited their toy sales as a driving force. Both Target and Disney said that the new Disney stores would be staffed by Target employees. Bob Chapek, chairman of Disney parks, expressed his optimism about the deal, stating “The experiential retail coming to Target is just what today’s consumer is looking for.”
Target is optimistic about the moves they are making before the biggest retail season of the year. Target shares have already outpaced the retail industry and Disney has slightly outperformed its respective Media market.
Target is sporting a Zacks Rank #2 (Buy) and Disney is currently listed as a Zacks Rank #5 (Strong Sell). TGT’s deal with DIS comes on the heels of its latest partnership with Levi Strauss LEVI. Expanding their national brand partnerships has been at the forefront of Target’s efforts and their strong performance in 2019 makes them a desirable partner. Target has looked for new attractions to get more people in their doors, and Disney has been looking to expand their stores outside of conventional malls. The deal appears to be mutually beneficial for the moment, but time will tell if it becomes financially fruitful for both companies
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