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Target Looks Well Poised to Continue Winning Streak in 2020

Zacks Equity Research

In an era of ever-evolving retail landscape, Target Corporation TGT has made multiple changes to its business model to adapt and stay relevant. Notably, this Minneapolis, MN-based company looks well poised to commence 2020 on an encouraging note, given its sound fundamentals and growth efforts. Factors such as steady wage gains, solid labor market and improving consumer sentiment have been also favoring this general merchandise retailer.

This Zacks Rank #1 (Strong Buy) stock has soared 95.5% so far in the year, outperforming the industry and the S&P 500’s rally of 45.2% and 28%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Additionally, the stock’s long-term earnings growth rate of 7.5% and a VGM Score of B reflect its inherent strength. Moreover, the Zacks Consensus Estimate for fiscal 2020 top and bottom line indicates year-over-year improvement of 3.7% and 7.6%, respectively.

Strategic Endeavors to Drive Momentum

Retail is no more restricted to brick-&-mortar. The scenario has changed drastically with the advancement of technology and digital transformation, which have altered consumer shopping patterns. Consumers now seek more convenience, personalization and speed, and retailers are coming up with ground-breaking ideas to build a loyal customer base.

Target is deploying resources to enhance omni-channel capabilities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options to take on rivals. Such efforts help drive robust traffic, favorable store comps and comparable digital sales.

From quite some time, Target has been also investing in groceries in the wake of rising competition from retailers such as Amazon AMZN, Kroger KR and Walmart WMT. The company launched a new food brand, Good & Gather. Prior to this, the company has launched private-label brands namely Everspring, Auden, Colsie and Cloud Island Essentials.

Moreover, it has added same-day delivery options and undertaken steps to augment supply chain. It is deploying resources for technology and process improvements. Further, it has launched a new loyalty program, Target Circle, nationwide on Oct 6, 2019. Courtesy of this program, customers can avail more convenient and customized shopping experience.

Other notable endeavors include Target Restock program that enable customers to restock their shipping box with essential items online and get them delivered at their doorstep by the next business day. Drive Up, an app-based service, is another initiative to expedite the shopping process. The service enables customers to place orders utilizing the Target app and have them delivered to their cars. The company offers the service across more than 1,750 stores.

Further, in order to improve supply chain and expand delivery capabilities, the company acquired Grand Junction. Earlier, Target had teamed up with popular online grocery delivery service, Instacart, to capture the booming online grocery delivery market. The company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service, Shipt, to provide same-day delivery of groceries, essentials, home, electronics, toys and other products. Shipt operates in more than 1,500 outlets in more than 200 markets.

Wrapping Up

Target has taken steps that have improved prospects in a big way. The company’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments, and emphasis on flexible format stores to generate higher sales productivity bode well.

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