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Target Corp TGT

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Rising Costs Hit Target but Should Not Affect Our Long-Term Outlook; Shares Seem Expensive

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $159 per share valuation of no-moat Target should rise by a mid-single-digit percentage after it announced third-quarter earnings. The chain saw another quarter of exceptional comparable sales growth (12.7%), handily beating our 7.5% expectation on strong store traffic. While the results will push our near-term top-line expectations higher (contributing to the planned valuation increase, along with a time value of money-related adjustment), our long-term forecast is intact (low-single-digit percentage sales growth, 8% adjusted operating margins, on average).

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Company Profile

Business Description

With 1,897 stores (as of the end of fiscal 2020), Target is a leading American general merchandise retailer, offering a variety of products across several categories, including beauty and household essentials (26% of fiscal 2020 sales), food and beverage (20%), home furnishings and décor (20%), hardlines (18%), and apparel and accessories (16%). Most of Target’s stores are large, averaging nearly 130,000 square feet. The company has a significant e-commerce presence, deriving around 18% of sales from the channel (up from about 9% in fiscal 2019, before the pandemic). In addition to its namesake stores, Target owns Shipt, an online same-day delivery platform. After it exited Canada in 2015, virtually all of Target’s revenue is generated from the United States.

1000 Nicollet Mall
Minneapolis, MN, 55403
T +1 612 304-6073
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Oct 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Aggressive Growth
Employees 409,000