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Target to Expand Its Beauty Market

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The online beauty industry is growing by leaps and bounds, and Target Corporation (TGT) intends to leave no stone unturned in making the most of this booming market. This is evident from its latest deal to acquire DermStore Beauty Group, an online beauty retailer that would further strengthen its footprint in this segment by enhancing its portfolio of offerings. The financial terms of the deal, which is expected to conclude within 60 days, were not revealed.

Target hinted that DermStore, which will become a wholly owned subsidiary, will sustain its operation under the name DermStore.com. The transaction, which is strategically important in the long run, amid a sluggish, competitive economic environment, is not expected to have a favorable impact on the company’s fiscal-2013 results.

The current CEO of DermStore, Dan Obegi, will spearhead the wholly owned subsidiary and directly report to Casey Carl, the President of Multichannel and Senior Vice President, Enterprise Strategy at Target.

Founded in 1999, DermStore offers its products through the online platform targeting approximately 1 million active consumers. The website showcases more than 26,000 SKUs and 750 brands such as SkinMedica, SkinCeuticals, Obagi and Dermalogica. The company in order to extend its wings in the cosmetics and hair care market recently launched two more websites, hairenvy.com and blush.com.

Target, in order to augment its presence in key markets, has been attempting to acquire small businesses and DermStore is the latest addition. Earlier, in March Target entered into 2 separate transactions to acquire CHEFS Catalog and assets of Cooking.com to tap the rapidly expanding cooking and kitchenware market.

Going forward, this Zacks Rank #4 (Sell) stock intends to focus on its core businesses. The company plans to sustain its remodeling program at existing general merchandise locations by the addition of an expanded food section along with a greater assortment of dry dairy and frozen items, improved store layout and enhancement of in-store shopping experience across departments, such as apparel, home, beauty, shoes and baby.

Alongside, Target is seeking promising expansion opportunities in international markets such as Canada and Latin America. Recently, the company revealed its plans to introduce smaller-format stores called CityTarget, similar to that of its biggest rival, Wal-Mart Stores Inc. (WMT).

Moreover, Target announced its year-round price matching policy with the aim of offering its patrons the facility to match the prices offered by online retail giants.

The company will match prices with Amazon.com Inc.’s (AMZN) Amazon.com, Wal-Mart’s Walmart.com, Best Buy Co. Inc.’s (BBY) BestBuy.com, and Toysrus.com. Target believes that its price matching policy coupled with the REDcard reward program would provide it an edge over its competitors.

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