Description
Target Corporation is the second largest retailer in the U.S. with over 1700 Target and Super Target stores. Targets around the country offer everything from household essentials to computer software to groceries, and sell many of their products under private label brands. In addition to their retail segment, the company also offers credit and debit cards to its frequent shoppers.
Integrated Company
Analysis
Target Corporation
December 14, 2010
Group: B7
Eric Dowling Alex Davydov Matthew Melnicoff Soledad Querol Molly Rotsch
2
Contents
Executive Summary ............................................................................................................................................. 3
Marketing Analysis ............................................................................................................................................. 3
The Target Brand ............................................................................................................................................ 3
"The Guest" .................................................................................................................................................... 4
Target's Competitors ...................................................................................................................................... 4
Expect More, Pay Less .................................................................................................................................... 4
Rise of the Store Brand ................................................................................................................................... 5
Up and Up......................................................................................................................................................6
The Introduction of PFresh............................................................................................................................7
Accounting Analysis...........................................................................................................................................8
Financial Analysis .............................................................................................................................................. 10
Capital Expenditures.....................................................................................................................................10
Financing ....................................................................................................................................................... 11
Stock Buy Back .............................................................................................................................................. 11
Canada in the News ...................................................................................................................................... 12
Conclusion ......................................................................................................................................................... 13
3
Executive Summary
Target Corporation is the second largest retailer in the U.S. with over 1700 Target and Super Target
stores. Targets around the country offer everything from household essentials to computer software to
groceries, and sell many of their products under private label brands. In addition to their retail segment, the
company also offers credit and debit cards to its frequent shoppers.
In our report, we analyze company's past and present performance through a thorough study of Target's
brand, their accounting disclosures and overall financial performance. Based on our findings, we suggest
that the company:
? Continues to expand its private label offerings
? Considers relocating the grocery section to the rear of the PFresh stores
? Explores expanding its operations to Canada
Marketing Analysis
The Target Brand
In 2002 the Minneapolis-based Target Corporation became the United States second largest discount
retailer behind Wal-Mart. According to “Simply Better” from the Harvard Business School Press, Target?s
success can be attributed to two key factors: the right kind of differentiation and distinctive marketing
communications. Target positioned itself as a mass merchant selling affordable yet stylish goods
i
(Appendix 1).
Today Target has transformed its signature bulls-eye logo into a lifestyle symbol. The bulls-eye is
recognized by 96% of American consumers and considered a brand icon in a class with Nike's swoosh and
McDonald's arches.
ii
This was accomplished through a strong commitment to advertising to build an iconic
brand. Target has reportedly spent 2% of its revenue in advertising compared to 0.4% spent by Wal-Mart or
5% spent by Macy?s in 2009.
iii
Additionally, Target shows its commitment to building a chic brand by
offering exclusive lines in partnership with well-recognized designers. Target is no stranger to providing top
4
designer labels without the ready-to-wear prices. Past and current partnerships include, Isaac Mizrahi, Jean-
Paul Gaultier, Anna Sui, Todd Oldham, Zac Posen and the late Alexander McQueen. These partnerships
have proven profitable as customers flock to secure items from these designers at prices they can
comfortably afford. Most recently, Target has aligned with the Gilt Groupe, an online retailer that
commercializes premium brands at discounted prices, to offer select lines for limited periods of time.
"The Guest"
Target customers, referred to as “The Guest” are on average younger, well-educated and affluent.
According to Target, the shopper is predominantly female with a median age of 42, a median household
income of approximately $60,000, 51% have completed college and 33% have children at home.
Target's Competitors
Target faces strong competition from wholesalers such as Walmart and Cotsco as well as department
stores like Macy?s and Sears Holding Company. Nevertheless, it has secured a strong position in the market,
holding a 33.4% department store market share
iv
while the Super Target represents 3.8% of the Warehouse
Clubs & Super Centers in the US
v
(Appendix 2).
Expect More, Pay Less
With its “Expect More, Pay Less” brand promise, Target has historically positioned itself at a slight
price premium over its competition. Through creative, thoughtful campaigns such as “Design For All,”
Target incorporated fashion, trendiness and value into its messages. This approach supported the full “Expect
More, Pay Less” brand promise and served to build a cheap-chic, class-to-mass image for Target (Appendix
3). As a result, Target carefully carved out a niche for itself as the upscale discounter wherein it was able to
pull up bargain-hunting consumers from the low cost mass merchants and also lure fashion and design-
conscious clientele away from specialty and department stores.
During the recession, Target?s emphasis on “Expect More” was internally thought to be putting the
company at a disadvantage due to consumers shifting priorities. The consumer perception that trend-right
merchandise comes at a price premium provoked customers to trade down, which impacted overall sales.
vi
5
For this reason, in the early stages of the economic downturn, Target?s stock dropped more than 60%
whereas Wal-Mart?s stock rose by over 50%.
vii
In an effort to change consumer perceptions about its prices and to turn around its poor performance
during the recession, Target shifted its message towards the “pay less” portion of its well-known “Expect
More, Pay Less” brand promise. Part of this strategy included focusing on more basic, recession-proof items
such as groceries. About 60% of Target?s sales came from discretionary items such as clothing and home
décor, which were items that were cut from shopping lists during the recession.
viii
A key example of Target?s
new effort is “The Great Save” event which was held in early 2010. It featured bulk products in a warehouse
club-like setting (Appendix 4).
ix
Another key issue to recognize is that Walmart is concurrently attempting to shift its brand image
upwards by moving away from its traditional image based solely around low prices. This is evidenced by its
shift in motto from “Always Low Prices” to “Save Money, Live Better” which was accompanied by a change
in brand logo (Appendix 5). It has also undergone a massive store remodeling effort, dubbed “Project
Impact”.
x
If the two companies meet somewhere in the middle, an identity crisis could emerge (Appendix 6).
In that situation, Target stands to lose more.
Chasing other retailers to low prices is a mistake as it is a space Target cannot win in. Target has
established itself as an iconic, almost heroic, brand that can do little wrong. It has spent years building its
image as a cleaner, trendier and generally more pleasant shopping experience than its competitors. This
image has had immeasurable advantages in the marketplace. The inherent danger of beginning to focus on
price is that consumers may perceive less of a difference between Target and its competitors. This would
tarnish Target?s brand image and eat away at the tremendous brand equity that it has spent decades
establishing. By moving to a focus on price, Target is chipping away at one of their most important assets:
their brand equity.
Rise of the Store Brand
As evidenced in multiple retailers? assortments across the nation, the rise of store brands continues to
surge. This trend is no different at Target where proprietary brands account for more than 33% of total
6
sales.
xi
This begins with understanding the consumer: “Our guests are savvy and know they don?t have to
spend a lot to get high-quality products,” said Mark Schindele, SVP of Merchandising.
xii
At the beginning of 2010, the Private Label Manufacturers Association (PLMA) released its annual
report that details actual purchase behavior of consumers, lending credence to private label products. The
report found that while shoppers expect that retailers will offer popular national brands, when it comes down
to share of wallet, store brands are the clear winner. In 2009, private label brands accounted for over 19% of
total market value, up from less than 15% in 2003.
xiii
The president of the PLMA was quoted as saying the
following about store brand popularity: “Its success began years before the current downturn and is rooted in
increasing assortment, quality ingredients, innovative product concepts and retailer commitment.” Target has
taken its commitment to private labels to a new level with the brand launches such as up&up.
up&up
The up&up brand was officially launched in June 2009. It was the result of an effort by Target to re-
brand the company?s core commodity assortment that was historically known as Target Brand, which was
first introduced in 1962. The up&up brand adorns over 800 everyday essential products from household to
healthcare. Target maintains that the newly introduced brand is of equal quality to established national
brands, and goes so far as to mention this on packaging. The point of differentiation from the well-known
brands is the price, which is lower by 30% on average.
At the outset, Target recognized that up&up would allow them to cast private label brands in a new
light. Schindele commented on this saying, “By re-launching Target brand as up&up, we?re able to create a
unique identity for this powerful owned brand. The new packaging incorporates an element of design, giving
us the opportunity to deliver on both the „expect more? and „pay less? sides of our brand promise."
xiv
The
logo and packaging itself appears to be much more in line with Target?s rich history of design awards
(Appendix 7). The company is breaking out of the mold and diverging from the tired formula many store
brands use, which usually involves slapping an uninteresting logo on a box and effectively making a less
expensive product look cheap. Target?s relaunch is fresh, well thought out, minimalist and attractive. The
company also has the potentially unintended symbolism of the up&up arrow and the Target bulls-eye.
7
Sales of Target Brand products were cruising along at a steady clip: 25% compound annual growth
rate for the past five years, which led us to examine the reasoning behind Target?s decision to rebrand a line
that was performing at an astonishing pace. Although the re-launch gives new life to the store brand, Target
may have additional motivation for creating a sub-brands, which are created to distance the brand name of
the company from the products they sell. For example, if something goes awry with a product, the parent
company?s brand name is not tainted. We see this strategy used repeatedly by car companies (Mini Cooper
by BMW) in order to handle their sub-brand as a separate entity. In this way, any negative PR can be
directed at the underlying brand. For a company like Target, who has over time built incredible brand equity
in their name and logo, this shift makes a lot of sense.
The up&up brand has continued to build on the original success of the Target Brand, having shown
increases in penetration and sales each quarter since the launch. If the growth of private label persists, it is
likely that up&up will be awarded more space on store shelves. Target should continue to add products to the
up&up portfolio as the company has seen marked success with the re-launch and has been able to draw much
positive attention to the new brand. Margins on these products are much higher than those of nationally-
branded items, making the store brand attractive from a financial standpoint.
The Introduction of PFresh
One of Target?s largest initiatives over the course of the past year has been the renovation of 340
stores into a new format called PFresh. This is the name the company gave to a concept that features a
dramatically expanded assortment of food in addition to upgrades in such departments as beauty, shoes,
pharmacy, electronics and home (Appendix 8). PFresh was developed with aim of driving sales by attracting
grocery shoppers to the stores.
xv
According to Tammy Robertson, Target?s spokeswomen, PFresh stores will
provide 90% of the categories and 60% of the products offered at Target SuperStores.
The renovations have been paying off as the addition of food and consumables has enormous traffic-
generating benefits, which have traditionally helped to get the consumer through the front door. Once they
are in the store, Target has the ability to expose more consumers more often to their discretionary product
8
offerings. In addition, the inclusion of food can potentially attract new customers. In 2010 alone, the concept
is giving back: same store sales are expected to increase by an additional 1% due to the PFresh remodels.
CEO Gregg Steinhafel is bullish about the PFresh initiative: “Our store has never been in better condition
and we?ve got two game changing strategies; PFresh and 5% Rewards that will drive our performance in the
4th Quarter and for years to come. I?m more confident than ever that these strategies will deliver incremental
sales while maintaining our current healthy retail operating margin.”
xvi
Next year, another 400 PFresh renovations are slated to get underway, bringing the total count of
PFresh stores to 850. Although this strategy is shifting the capital budget use to store remodeling rather than
new construction, we believe that it will continue to post increasing returns. If the company continues
remodeling at the current pace, completing a chain-wide renovation may take until 2015.
xvii
This change in
store format will also bring about change in product mix, as food begins to account for an increasingly larger
percentage of sales. There have already been hints of this shift demonstrated in the company?s financials: at
the end of the last fiscal year, the food and pet supply category had grown to represent 16% of total sales
compared with 13% two years earlier.
xviii
The challenge for Target is finding a way to link increased traffic to
increased basket-size in areas that are not grocery-related.
We recommend that Target considers moving the grocery section of the PFresh remodel to the back
of the store. Currently most of the perishable and dry consumables are towards the front of the store,
allowing customers to enter the store for groceries and never see any other higher-margin merchandise. If
Target is hoping to increase basket size and get grocery customers to pick up a few other items while in the
store, it would be advantageous to put these items on the customer?s intended path.
Accounting Analysis
Target?s inventory and the related cost of sales are accounted for using the LIFO method, which is
the method they have consistently used in the past. LIFO allows Target to decrease their taxes as their
taxable income decreases because of a higher cost of goods sold. While competitors Wal-Mart and Costco
also use the LIFO method for their domestic operations, they both utilize FIFO for their international
segments, which is in line with industry standards.
9
Target manages its merchandise by entering into arrangements with vendors where they do not
purchase or pay for merchandise until it is sold to the consumer. Merchandise received under the program is
not included in inventory due to the simultaneous purchase and sale of this inventory. Sales made under these
arrangements totaled $1.8 billion in 2009. Based on a gross margin of 29.3%, the annual increase in
inventory in 2009 of $1.27 billion and of $1.09 billion in 2008 would decrease ROA from 6.6% to 6.4%.
Considering an inventory turnover ratio of 6.44x, it can be assumed that there would be an additional $198
million in inventory on the books at any given time. Current assets would increase to $18.2 billion,
increasing Target?s 2009 current ratio from 1.63x to 1.64x.
Long-lived assets are stated at cost for both Target and Wal-Mart. Target reviews assets for
impairment annually and also when events or changes in circumstances indicate that the asset's carrying
value may not be recoverable. This differs from Wal-Mart and Costco, as they only review the assets when
events or changes in circumstances indicate that the asset?s carrying value may not be recoverable. Costco
also reviews long-lived assets for impairment when management makes the decision to relocate or close a
warehouse. Impairment in 2009 totaled $49 million, $2 million in 2008 and $7 million in 2007.
Target?s 2009 revenue growth suffered in the wake of the economic downturn. At 0.6%, this is a
significant decline from the 2004 – 2008 annual average of 9.2%. This year has been more successful as
revenue for the trailing twelve months as of October 2010 is 2.4% above that of 2009. Wal-Mart?s revenue
growth of 0.9% is in line with Target while Costco, at 9.1%, has outperformed the two. Costco?s revenue
growth is attributed to an increase in the cost of gasoline as well as a weakening U.S. dollar, factors that
would not benefit Target.
Target is consistently in excellent position to cover short term liabilities as their current ratio has
averaged 1.5x over the past five years. However, Target does take on significant long-term debt, as shown by
their high debt-to-equity ratio. Target?s three year average of 1.2x is significantly higher than the 2006 and
2005 average of 0.7x. In 2007, long-term debt was increased 74% from $8.7 billion to $15.1 billion mainly
to fund its stock repurchase program. Maturities for these new debt issuances ranged from five to thirty years
(Appendix 9).
10
Target?s accounts receivable turnover ratio is significantly less than that of their competitors because
a large portion of their sales are made with the Target credit card. These sales increase receivables whereas
purchases made with non-Target credit cards do not as they are immediately settled with the third-party
bank. Over the past three years, sales purchased with the Target credit card averaged $3.8 billion and
accounted for 6.0% of total sales. Accounts that were 90 days past due as of January 31, 2010 totaled $371
million, or 2% of current assets. With an allowance for bad debt equaling 14% of average gross credit card
receivables, writing down the remaining $319 million would only increase the accounts receivable turnover
ratio to 8.8x and would decrease the current ratio to 1.60x. Finance charges for these balances are accrued
until the balance is written off once 180 days past due. Target also transfers credit card receivables to a
bankruptcy-remote subsidiary which in turn transfers them to a trust in Target?s name. The trust will
sometimes sell the receivables to a third party in the form of a secured borrowing. Since Target guarantees
the payments to the buyer, these receivables are still accounted for as an asset for Target.
One area where Target can improve is their inventory management. Their 2009 inventory turnover
ratio of 6.4x is well below that of Wal-Mart and Costco (Appendix 10). Since a portion of Wal-Mart?s and
Costco?s inventory is accounted for under FIFO, under which their inventory would be stated at a value less
than under LIFO, the discrepancy between Target and its competitors is magnified. This demonstrates that
Target carries too much inventory, which is an inefficient use of the firm?s resources. A second example of
this is their relatively high average days inventory outstanding (Appendix 10), indicating that it takes Target
too long to turn its inventory into sales.
Financial Analysis
Capital Expenditures
The majority of Target's capital expenditure has been allocated to new store openings, remodeling
and information technology upgrades.
xix
Since 2004, the company dedicated at least 60% of its capital
spending to new store openings. However, in 2009 the pattern slightly changed with the new store openings
and store remodeling and expansion accounting for 52% and 17% of total CapEx, respectively. We believe
that this deviation can be attributed to both poor economic conditions in 2009 and to planned grocery
11
additions. As disclosed in the 2010 10-K report, Target looks to open between 20 and 30 stores in 2011 after
slightly less ambitious growth in 2010, during which 13 stores were opened. The company planned to
increase its CapEx budget in 2010 to between $2.0 and $2.5 billion after spending only $1.7 billion in 2009,
which was the lowest by Target since 1999. However, the 2009 figure is not surprising since the company
relies heavily on "public debt markets to raise capital for new store developments and other capital
expenditure."
xx
With the capital market liquidity crisis behind us and strong retail growth over the holiday
season, Target is expected to slowly expand its CapEx spending in 2010 and beyond.
Financing
As mentioned above, Target has been sponsoring its CapEx through the issuance of public debt and
the use of internal funds. The company's repurchase has exceeded the issuance of common stock every year
since 1998, with the exception of 2002.
xxi
Meanwhile, the issuance of debt securities has exceeded their
repurchases by $10.7 billion over the same time frame. Specifically, the company's borrowing has consisted
of the issuance of unsecured debt obligations, non-recourse debt backed by the credit card receivables and
short-term commercial paper. Target also has access to a $2 billion credit line which can be used in
conjunction with the commercial paper issuances for holiday spending. The company has recently increased
the proportion of borrowing through non-recourse debt obligations. These obligations reached 27% and 29%
of total debt for 2009 and 2008, respectively, after having been below 20% since 2001. As disclosed in the
2010 10-K report, Target's non-recourse debt accrues interest expense tied to the floating LIBOR rate (plus
premium), thus exposing the company to some market risk. However, with LIBOR currently at an all-time
low,
xxii
the company finds the floating rate more attractive than a fixed borrowing rate.
Stock Buy Back
In November 2007, Target?s Board of Directors instituted a stock repurchase plan in the amount of
$10 billion, which replaces a $3 billion repurchase plan that was approved in June 2004. At the time of the
approval, the $10 billion represented approximately 20% of the outstanding shares. A benefit of
implementing this three-year plan was to increase the use of debt in the firm?s capital structure, which was
12
the primary source of financing for the repurchase. In September of that year, Target came out with an
objective to achieve a credit profile that would maintain an “A” rating with respect to its long-term debt.
xxiii
The program was halted one year later due to liquidity issues related to the economic downturn. In January
of this year, the program was re-instituted due to the strength of business operations, adequate liquidity and
better conditions in the capital markets. So far this year, Target has acquired over $2 billion of its stock,
signaling that the company viewed its stock as under-priced. After spending the remaining $2.6 billion on
additional shares, the company should look into new projects instead of continuing the buy-backs and
accumulating retained earnings. Target has not engaged in any major initiatives, outside of store remodeling
to accommodate grocery section, since 2004 when it sold department store chains Mervyn?s and Marshall
Fields.
Canada in the News
Target?s growing interest in Canada was discussed in a Wall Street Journal article posted on October
6.
xxiv
According to the CFO of Canadian real estate development company RioCan, Target is exploring
opening its first stores outside of the U.S. in 2014 - 2015. These discussions hint at the move to Canada will
differ from Wal-Mart?s entrance, which involved the purchase of 122 Woolco stores in 1995.
xxv
Since then,
Wal-Mart has expanded to 322 stores across the border. Target?s move to Canada seems like a lucrative
project in which to invest after the share-repurchase program ends. Expanding into Canada would help with
its overexposure to U.S. economic conditions. The Canadian retail industry was able to weather the
economic downturn significantly better than Target and other U.S. retailers (Appendix 14). Wal-Mart?s
presence in international markets helped the company to outperform both Target and the S&P 500 index
during the past recession (Appendix 15), with their international sales growing faster than the U.S. sales.
xxvi
Target?s move to Canada can be a first step in achieving a similar level of protection from an under-
performing domestic market.
In addition to Wal-Mart, Target will have to contend with HBC?s Zellers, operating 279 mass
merchandise stores, and HBC?s Fields, which has 196 locations and offers highly discounted
merchandise.
xxvii
However, we believe that the move to Canada is worth pursuing since the country offers
13
political and economic stability, does not present a logistical challenge and provides future growth potential
(Appendix 18 & 20).
Conclusion
Overall, we feel the company has been performing well and is poised for future growth. With a few
suggestions, Target can become an even more relevant brand, dynamic retailer and can become a player in
global retail markets. Opportunities exist in:
-Expanding its operations to Canada
-Returning to focusing on its full brand promise
-Continued development of products for the up&up portfolio
-Relocating the PFresh concept to the back of the store
14
Appendix 1:
15
Appendix 2:
ATTRIBUTES TARGET WALMART COTSCO SEARS
HOLDING
DOLLAR
GENERAL
CORP
Number of
Stores
1,753 2,932 413 3,519 8,100
State
Presence
49 49 40 42 35
Positioning “Expect more. Pay
Less”
“Save Money.
Live Better”
Membership
format.
Discounted
prices
“Money
well Spent”
“30% of
products
sold are
less than
$1"
Financial
Services
YES NO NO NO NO
Store Brands up&up, Archer’s
Farm,
Choxie,
Sutton&Dodge,
Market Pantry,
Wine Cube and
Circo
Sam’s Choice,
Great Value,
Equate, Ol’Roy,
Parent’s Choice,
White Stag,
George
Kirkland Kenmore,
Craftsman,
Die Hard
NO
Consumer Skewed females,
average HH
income
$ 60,000; well
educated.
Average age 42
Average HH
income less
than $45,000;
minority groups
60% has
income higher
than $55,000
Mix
consumer
demograph
ics
41% earns
less than
$30,000
14% earns
$20,000
16
Appendix 3:
Examples of prior ad campaigns for Target. These are examples of Target?s trendy, chic, fun, design-
conscious advertisements.
17
Appendix 4:
Example of Target?s new focus on “Pay Less.” This ad lacks Target?s token personality. It is generic and
could easily be mistaken for or used as an advertisement for many of Target?s competitors.
18
Appendix 5:
Wal-Mart?s logo and motto switch in 2008. New logo and motto have less focus on price.
19
Appendix 6:
Danger exists for Target if it ends up in the same low cost, high quality space that Wal-Mart is fighting to
enter
CUSTOMER PERCEPTION – Cost and Quality
20
Appendix 7:
Old vs. New Target Brand Product
21
Appendix 8:
Pfresh Store Concept
22
Appendix 9:
Maturity dates of long-term debt.
8,271
3,232
213
326
905
3,500
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2010-2014 2015-2019 2020-2024 2025-2029 2030-2034 2035-2037
Long-Term Debt Maturities
(in millions)
23
Appendix 10:
24
Appendix 11:
A
c
c
o
u
n
t
i
n
g
M
e
t
r
i
c
s
:
2
0
0
0
–
Q
3
2
0
1
0
25
Appendix 12:
Source: www.auditintegrity.com
In September, Audit Integrity placed Target in the 55th percentile among all companies, indicating higher
accounting and governance risk than 45% of companies.
26
Appendix 13:
Cost of Construction: Big Box Building
27
Appendix 14:
U.S. and Canada's Economic Conditions
Below you will find comparison data for GDP performance for the U.S.
xxviii
and Canada
xxix
in the retail sector
shortly before the recession of 2009.
During 2009, we know that Canada's retail portion of the GDP reversed the growth trend and decreased
.37%. Although the U.S. Retail sector's GDP for 2009 has not been made available by the Bureau of
Economic Analysis (BEA), we suspect that 2009 Retail output underwent another significant drop in growth.
This can be derived from the information on the value added by the retail sector in 2009
xxx
, which dropped
additional 2.74%.
Another economic indicator of Canada's economic stability is the country's unemployment data
xxxi
.
Compared to the U.S.
xxxii
, unemployment in Canada has been historically slightly higher. However, during
5%
2%
-2%
6%
4%
3%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2006 2007 2008
GDP Growth in Retail Sector
U.S. % Retail GDP
Change
Canada % Retail GDP
Change
4.32%
2.03%
-3.01%
-2.74%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
2006 2007 2008 2009
% Change in Retail Value Added to
GDP (U.S.)
% Change in Retail Value
Added to GDP (U.S.)
28
the global economic downturn, the country did not experience the same level of rise in their unemployment
as did the U.S. Recent unemployment data in Canada points to an overall unemployment rate drop to 7.3%
for 2010, with retail and wholesale sectors' employment growing by 2.2% compared to last year.
6.8%
6.3%
6.0%
6.1%
8.3%
5.1%
4.6% 4.6%
5.8%
9.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2005 2006 2007 2008 2009
Unemployment as % of Labor Force
Unemployment, Canada
Unemployment, US
29
Appendix 15:
International Markets Helping Wal-Mart During Poor Domestic Economic Conditions
As discussed above, we believe that Wal-Mart's exposure to international markets contributed to their steady
performance during the recent recession. Wal-Mart's total sales received a boost from international markets,
including Canada, with the international segment's sales growing 1.3% and 9.1% in 2009 and 2008,
respectively. These numbers eclipsed Wal-Mart's U.S. sales growth of 1.1% and 6.9% (not including Sam's
Club, which experienced negative growth) for the same time period, and the international segment is now
contributing 24.7% of the company's total sales.
xxxiii
Combined with the company's appeal to extremely price conscious consumers, Wal-Mart's international
segment helped the company perform relatively well compared to Target during the tough economic
conditions of 2009.
Even though Target is experiencing strong stock performance coming out of 2009, we feel that expansion
abroad will be a good step to help the company's performance during poor domestic economic conditions.
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
Wal-Mart Stores Inc. (NYSE:WMT) - Share Pricing
Target Corp. (NYSE:TGT) - Share Pricing
30
Appendix 16:
Beta Calculations
In order to calculate Target's WACC we looked at the company's daily stock prices from 11/30/1990 to
11/30/2010.
xxxiv
Subsequently, we compared percentage changes in company's stock price to percentage
changes in the S&P 500 index for the same time period using linear regression. This method enabled us to
derive the company's Equity Beta value of 1.095.
Our sensitivity analysis in Appendix 15 also included Equity Beta value of 1.066 derived from examining
company's performance against S&P 500 for the last 10 years.
y = 1.0951x + 0.0004
R² = 0.3466
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
-0.15 -0.1 -0.05 0 0.05 0.1 0.15
Target's Equity Beta Estimate (20 yr comparison to S&P 500)
y = 1.0665x + 0.0004
R² = 0.3821
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
-0.15 -0.1 -0.05 0 0.05 0.1 0.15
Target's Equity Beta Estimate (10-yr comparison to S&P 500)
31
Appendix 17:
WACC Sources and Calculations
? Equity Beta - regression analysis
? Cost of Debt and Market Risk premium were obtained from Bloomberg
xxxv
? 10-year T-Bill yield as of December 2 was obtained from the U.S. Department of Treasury site
xxxvi
? Tax Rate - obtained from 10K report through Capital IQ
xxxvii
? Market Capitalization and recent 10Q numbers for Cash and Short Term Inv., Current Portion of LT
Debt and LT Debt were obtained from Capital IQ
xxxviii
Target WACC calculation using Equity Beta, which was derived by comparing company's daily stock
price to S&P 500 for the past 20 years
Equity Beta 1.0951
Risk Free Rate 10-year T-bill 3.01%
Market Risk Premium 8.06%
Cost of Equity 11.84%
Cost of Debt (before taxes) 3.81%
Tax Rate 35.70%
Cost of Debt 2.45%
Market Capitalization $ 41,741.4
Cash and Short Term Inv. $ (936)
Current Portion of LT Debt $ 850
Long Term Debt $ 15,680
Total Enterprise Value $ 57,335.4
Equity Share 71%
Debt Share 29%
WACC 9.13%
Target WACC calculation using Equity Beta, which was derived by comparing company's stock price
to S&P 500 for the past 10 years
Equity Beta 1.0665
Risk Free Rate 10-year T-bill 3.01%
Market Risk Premium 8.06%
Cost of Equity 11.61%
Cost of Debt (before taxes) 3.81%
Tax Rate 35.70%
Cost of Debt 2.45%
Market Capitalization $ 41,741.4
Cash and Short Term Inv. $ (936)
Current Portion of LT Debt $ 850
Long Term Debt $ 15,680
Total Enterprise Value $ 57,335.4
Equity Share 71%
Debt Share 29%
WACC 8.97%
32
Appendix 18:
Overview of Valuation Assumptions and Sensitivity Analysis for Target Stock Prices
xxxix
? Our WACC estimates of 9.13% and
8.97% are based on the Beta
calculations discussed in Appendices 4
and 5. The WACC of 8.45% is a
Bloomberg reported WACC.
? 2.4% growth in perpetuity comes from
the Congressional Budget Office
forecast for GDP growth for 2015-
2020.
xxix
2.8% growth estimate is the
average GDP growth experienced in
the retail sector from 1999-2009 based
on the data from the Bureau of
Economic Analysis. The 3.0% estimate
is an optimistic economic growth case.
33
Appendix 19:
Details on DCF Assumptions and DCF Base Case Results
Sales Growth
? As disclosed on the previous slide, our revenue growth is projected based on the IBIS industry
reports and average GDP performance in the retail sector for Canada and the U.S. for years that
industry reports do not cover (See Appendix 17 for details on growth estimates). To come up with
our growth estimates, we averaged the growth forecasts for the U.S. Warehouse Clubs and
Supercenters
xl
, and Dollar and Variety
xli
stores since Target operates and competes in these two retail
sectors (for years in which retail forecasts are available). In addition, our growth forecast includes
contributions from openings of new stores. We estimated new stores annual contribution to total
revenues to equal ~$33.7 million based on the average 2004-2010 new store contributions calculated
based on the company's 10K disclosures.
? We estimated Target's Credit Card segment sales to decrease by 17% in 2010 based on the 10Q
disclosure. We forecasted the sales to stabilized in 2011 before growing analogous to store sales
growth from 2012-2019.
Expenses
? We estimated SG&A to stay at 20% of Target's Sales based on the 10yr historic average.
? We estimated COGS to remain at 70.2% of Target's Sales based on company's recent 10Q.
disclosure. This is a slightly more conservative estimate than the 10yr historic average.
? Credit card expenses are forecasted to decrease by ~37% based on the recent company disclosure.
We estimated the credit card expense to decrease an additional 10% as credit card delinquencies
improve with better economic conditions before growing with the credit card revenues thereafter.
Depreciation and Amortization:
? We estimated D&A to grow by 10.8% annually based on historic
average.
Key Working Capital Items:
? We estimated accounts receivable to grow with the sales revenue growth.
? We estimated inventories and accounts payable to grow based on the
yearly growth of COGS.
34
Appendix 20:
Details on Revenue Growth Estimates
Revenue Growth Projections are based on the number of store openings, industry reports data and GDP
growth in the retail sector for the U.S. and Canada.
** A spike in revenue growth for 2015 and 2016 for the best case scenario, which includes store openings in
Canada, is based on the Wal-Mart's international sales contribution of 1.1% to total sales growth after its
expansion to Canada in 1995
xlii
. Although Wal-Mart reported a 2.1% contribution to its total sales growth the
following year, we took a conservative estimate and increased sales growth by another 1.1%, due to the
smaller number of store openings Target is planning compared to Wal-Mart.
35
Appendix 21:
SWOT Analysis for Target Corporation
STRENGTHS
Brand Equity – Target is one of the most
recognizable brands in the US
Strong brand loyalty amongst consumers
2
nd
largest retailer in the US
Image of cleanliness, fashion, design-
forward thinking
Exclusive partnerships
REDcard
5% Rewards
WEAKNESSES
Consumer perception that prices are
slightly higher than competitors
No international presence
Product mix is heavily skewed towards
discretionary items ? not as recession
proof
Current divergence from full brand
promise of “Expect More, Pay Less”
OPPORTUNITIES
Store remodeling ?Expanding PFresh
concept
up&up brand growth
Increased online sales
Expansion into Canada
Urban store expansion
Growth in social media
Shopkick
THREATS
Competitors trying to move into a more
upscale image
Expanding grocery options with PFresh
could lead to lower margins
Competitors aggressively lowering prices
Shifts in economy that will push consumers
to competitors
36
Citations
i
Harvard Business School, Bullseye: “Target’s Cheap Chic Strategy”, August, 16, 2004
ii
Alice Z. Cuneo, "Francis's Mission: Shore Up Target's Sales by `Owning Red,"' Advertising Age, 24 February 2003
iii
Steve McKee, “What Should you spend on Advertising”, Business Week, February 10, 2009
iv
Robert J. Andrews, Department Stores in the US, IBIS, Industry Report 45211, September 2010
v
Casey Thomas, Warehouse Clubs & Supercenters in the US, IBIS Industry Report 45291, September 2010
vi
Zmuda, Natalie. “Retailers Fear Cheap Chic is not Cheap Enough in Down Economy,” Advertising Age, August 2008.
vii
Mirhaydari, Anthony. “Wal-Mart vs. Target: Who’ll win the recovery?,” MSN Money, May 14, 2010.
viii
Steverman, Ben. “Target versus Walmart; The Next Phase,” Bloomberg Business Week, August 18, 2009.
ix
Target Pressroom. “Target Introduces the Great Save.” http://pressroom.target.com/pr/news/target-introduces-the-
great-save.aspx January 2010.
x
Gregory, Sean. “Walmart’s Latest Move to Crush the Competition,” TIME, September 9, 2009.
xi
“All About Balance in 2010.” Target News Now, January 26, 2010.
xii
Target Pressroom. “Target up&up Brand Offers Great Quality at Low Prices,”
http://pressroom.target.com/pr/news/up-and-up-release.aspx June 2009.
xiii
Mirhaydari, Anthony. “Wal-Mart vs. Target: Who’ll win the recovery?,” MSN Money, May 14, 2010.
xiv
Target Pressroom. “Target up&up Brand Offers Great Quality at Low Prices,”
http://pressroom.target.com/pr/news/up-and-up-release.aspx June 2009.
xv
Mirhaydari, Anthony. “Wal-Mart vs. Target: Who’ll win the recovery?,” MSN Money, May 14, 2010.
xvi
“Setting the Bar High.” Target News Now, November 23, 2010.
xvii
“PFresh Pause Gives TGT Time.” Target News Now. October 5, 2010.
xviii
“PFresh Delivers Traffic Gift.” Target News Now. October 26, 2010.
xix
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xx
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxi
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxii
LIBOR Historical Data. http://www.wsjprimerate.us/libor/libor_rates_history.htm
xxiii
Target Corporation. "Target Corporation to Review Ownership Alternatives for Credit Card Receivables; Company
Also to Analyze Capital Structure." http://investors.target.com/phoenix.zhtml?c=65828&p=irol-
newsArticle&ID=1051094&highlight September 12, 2007.
xxiv
Talley, Karen and Andy Georgiades. "Target Explores Canadian Locations." WSJ Online.
http://online.wsj.com/article/SB10001424052748704689804575536273265184134.html October 6, 2010.
xxv
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxvi
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxvii
Hudson Bay Company. http://www.hbc.com/hbc/about/default.asp
xxviii
Bureau of Economic Analysis website. http://www.bea.gov/industry/gdpbyind_data.htm
xxix
Statistics Canada website. http://www40.statcan.gc.ca/l01/cst01/econ41-eng.htm
xxx
Bureau of Economic Analysis website. http://www.bea.gov/industry/gdpbyind_data.htm
xxxi
Human Resources and Skills Development Canada website. http://www4.hrsdc.gc.ca/[email protected]?iid=16
xxxii
US Bureau of Labor and Statistics website. ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt
xxxiii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxxiv
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
37
xxxv
Bloomberg Professional. Accessed through Bloomberg Terminal at the Nicholas Center for Corporate Finance and
Investment Banking.
xxxvi
U.S. Department of Treasury website. http://www.treasury.gov/resource-center/data-chart-center/interest-
rates/Pages/TextView.aspx?data=yield
xxxvii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxxviii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxxix
Congressional Budget Office Report. http://cbo.gov/ftpdocs/117xx/doc11705/08-18-Update.pdf August 2010.
xl
Thomas, Casey. "Warehouse Clubs & Supercenters in the US." IBIS Industry Report 45291. September 2010.
xli
Hamilton, Taylor. "Dollar and Variety Store in the US." IBIS World Industry Report 45299. September 2010.
xlii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
doc_694587148.pdf
Target Corporation is the second largest retailer in the U.S. with over 1700 Target and Super Target stores. Targets around the country offer everything from household essentials to computer software to groceries, and sell many of their products under private label brands. In addition to their retail segment, the company also offers credit and debit cards to its frequent shoppers.
Integrated Company
Analysis
Target Corporation
December 14, 2010
Group: B7
Eric Dowling Alex Davydov Matthew Melnicoff Soledad Querol Molly Rotsch
2
Contents
Executive Summary ............................................................................................................................................. 3
Marketing Analysis ............................................................................................................................................. 3
The Target Brand ............................................................................................................................................ 3
"The Guest" .................................................................................................................................................... 4
Target's Competitors ...................................................................................................................................... 4
Expect More, Pay Less .................................................................................................................................... 4
Rise of the Store Brand ................................................................................................................................... 5
Up and Up......................................................................................................................................................6
The Introduction of PFresh............................................................................................................................7
Accounting Analysis...........................................................................................................................................8
Financial Analysis .............................................................................................................................................. 10
Capital Expenditures.....................................................................................................................................10
Financing ....................................................................................................................................................... 11
Stock Buy Back .............................................................................................................................................. 11
Canada in the News ...................................................................................................................................... 12
Conclusion ......................................................................................................................................................... 13
3
Executive Summary
Target Corporation is the second largest retailer in the U.S. with over 1700 Target and Super Target
stores. Targets around the country offer everything from household essentials to computer software to
groceries, and sell many of their products under private label brands. In addition to their retail segment, the
company also offers credit and debit cards to its frequent shoppers.
In our report, we analyze company's past and present performance through a thorough study of Target's
brand, their accounting disclosures and overall financial performance. Based on our findings, we suggest
that the company:
? Continues to expand its private label offerings
? Considers relocating the grocery section to the rear of the PFresh stores
? Explores expanding its operations to Canada
Marketing Analysis
The Target Brand
In 2002 the Minneapolis-based Target Corporation became the United States second largest discount
retailer behind Wal-Mart. According to “Simply Better” from the Harvard Business School Press, Target?s
success can be attributed to two key factors: the right kind of differentiation and distinctive marketing
communications. Target positioned itself as a mass merchant selling affordable yet stylish goods
i
(Appendix 1).
Today Target has transformed its signature bulls-eye logo into a lifestyle symbol. The bulls-eye is
recognized by 96% of American consumers and considered a brand icon in a class with Nike's swoosh and
McDonald's arches.
ii
This was accomplished through a strong commitment to advertising to build an iconic
brand. Target has reportedly spent 2% of its revenue in advertising compared to 0.4% spent by Wal-Mart or
5% spent by Macy?s in 2009.
iii
Additionally, Target shows its commitment to building a chic brand by
offering exclusive lines in partnership with well-recognized designers. Target is no stranger to providing top
4
designer labels without the ready-to-wear prices. Past and current partnerships include, Isaac Mizrahi, Jean-
Paul Gaultier, Anna Sui, Todd Oldham, Zac Posen and the late Alexander McQueen. These partnerships
have proven profitable as customers flock to secure items from these designers at prices they can
comfortably afford. Most recently, Target has aligned with the Gilt Groupe, an online retailer that
commercializes premium brands at discounted prices, to offer select lines for limited periods of time.
"The Guest"
Target customers, referred to as “The Guest” are on average younger, well-educated and affluent.
According to Target, the shopper is predominantly female with a median age of 42, a median household
income of approximately $60,000, 51% have completed college and 33% have children at home.
Target's Competitors
Target faces strong competition from wholesalers such as Walmart and Cotsco as well as department
stores like Macy?s and Sears Holding Company. Nevertheless, it has secured a strong position in the market,
holding a 33.4% department store market share
iv
while the Super Target represents 3.8% of the Warehouse
Clubs & Super Centers in the US
v
(Appendix 2).
Expect More, Pay Less
With its “Expect More, Pay Less” brand promise, Target has historically positioned itself at a slight
price premium over its competition. Through creative, thoughtful campaigns such as “Design For All,”
Target incorporated fashion, trendiness and value into its messages. This approach supported the full “Expect
More, Pay Less” brand promise and served to build a cheap-chic, class-to-mass image for Target (Appendix
3). As a result, Target carefully carved out a niche for itself as the upscale discounter wherein it was able to
pull up bargain-hunting consumers from the low cost mass merchants and also lure fashion and design-
conscious clientele away from specialty and department stores.
During the recession, Target?s emphasis on “Expect More” was internally thought to be putting the
company at a disadvantage due to consumers shifting priorities. The consumer perception that trend-right
merchandise comes at a price premium provoked customers to trade down, which impacted overall sales.
vi
5
For this reason, in the early stages of the economic downturn, Target?s stock dropped more than 60%
whereas Wal-Mart?s stock rose by over 50%.
vii
In an effort to change consumer perceptions about its prices and to turn around its poor performance
during the recession, Target shifted its message towards the “pay less” portion of its well-known “Expect
More, Pay Less” brand promise. Part of this strategy included focusing on more basic, recession-proof items
such as groceries. About 60% of Target?s sales came from discretionary items such as clothing and home
décor, which were items that were cut from shopping lists during the recession.
viii
A key example of Target?s
new effort is “The Great Save” event which was held in early 2010. It featured bulk products in a warehouse
club-like setting (Appendix 4).
ix
Another key issue to recognize is that Walmart is concurrently attempting to shift its brand image
upwards by moving away from its traditional image based solely around low prices. This is evidenced by its
shift in motto from “Always Low Prices” to “Save Money, Live Better” which was accompanied by a change
in brand logo (Appendix 5). It has also undergone a massive store remodeling effort, dubbed “Project
Impact”.
x
If the two companies meet somewhere in the middle, an identity crisis could emerge (Appendix 6).
In that situation, Target stands to lose more.
Chasing other retailers to low prices is a mistake as it is a space Target cannot win in. Target has
established itself as an iconic, almost heroic, brand that can do little wrong. It has spent years building its
image as a cleaner, trendier and generally more pleasant shopping experience than its competitors. This
image has had immeasurable advantages in the marketplace. The inherent danger of beginning to focus on
price is that consumers may perceive less of a difference between Target and its competitors. This would
tarnish Target?s brand image and eat away at the tremendous brand equity that it has spent decades
establishing. By moving to a focus on price, Target is chipping away at one of their most important assets:
their brand equity.
Rise of the Store Brand
As evidenced in multiple retailers? assortments across the nation, the rise of store brands continues to
surge. This trend is no different at Target where proprietary brands account for more than 33% of total
6
sales.
xi
This begins with understanding the consumer: “Our guests are savvy and know they don?t have to
spend a lot to get high-quality products,” said Mark Schindele, SVP of Merchandising.
xii
At the beginning of 2010, the Private Label Manufacturers Association (PLMA) released its annual
report that details actual purchase behavior of consumers, lending credence to private label products. The
report found that while shoppers expect that retailers will offer popular national brands, when it comes down
to share of wallet, store brands are the clear winner. In 2009, private label brands accounted for over 19% of
total market value, up from less than 15% in 2003.
xiii
The president of the PLMA was quoted as saying the
following about store brand popularity: “Its success began years before the current downturn and is rooted in
increasing assortment, quality ingredients, innovative product concepts and retailer commitment.” Target has
taken its commitment to private labels to a new level with the brand launches such as up&up.
up&up
The up&up brand was officially launched in June 2009. It was the result of an effort by Target to re-
brand the company?s core commodity assortment that was historically known as Target Brand, which was
first introduced in 1962. The up&up brand adorns over 800 everyday essential products from household to
healthcare. Target maintains that the newly introduced brand is of equal quality to established national
brands, and goes so far as to mention this on packaging. The point of differentiation from the well-known
brands is the price, which is lower by 30% on average.
At the outset, Target recognized that up&up would allow them to cast private label brands in a new
light. Schindele commented on this saying, “By re-launching Target brand as up&up, we?re able to create a
unique identity for this powerful owned brand. The new packaging incorporates an element of design, giving
us the opportunity to deliver on both the „expect more? and „pay less? sides of our brand promise."
xiv
The
logo and packaging itself appears to be much more in line with Target?s rich history of design awards
(Appendix 7). The company is breaking out of the mold and diverging from the tired formula many store
brands use, which usually involves slapping an uninteresting logo on a box and effectively making a less
expensive product look cheap. Target?s relaunch is fresh, well thought out, minimalist and attractive. The
company also has the potentially unintended symbolism of the up&up arrow and the Target bulls-eye.
7
Sales of Target Brand products were cruising along at a steady clip: 25% compound annual growth
rate for the past five years, which led us to examine the reasoning behind Target?s decision to rebrand a line
that was performing at an astonishing pace. Although the re-launch gives new life to the store brand, Target
may have additional motivation for creating a sub-brands, which are created to distance the brand name of
the company from the products they sell. For example, if something goes awry with a product, the parent
company?s brand name is not tainted. We see this strategy used repeatedly by car companies (Mini Cooper
by BMW) in order to handle their sub-brand as a separate entity. In this way, any negative PR can be
directed at the underlying brand. For a company like Target, who has over time built incredible brand equity
in their name and logo, this shift makes a lot of sense.
The up&up brand has continued to build on the original success of the Target Brand, having shown
increases in penetration and sales each quarter since the launch. If the growth of private label persists, it is
likely that up&up will be awarded more space on store shelves. Target should continue to add products to the
up&up portfolio as the company has seen marked success with the re-launch and has been able to draw much
positive attention to the new brand. Margins on these products are much higher than those of nationally-
branded items, making the store brand attractive from a financial standpoint.
The Introduction of PFresh
One of Target?s largest initiatives over the course of the past year has been the renovation of 340
stores into a new format called PFresh. This is the name the company gave to a concept that features a
dramatically expanded assortment of food in addition to upgrades in such departments as beauty, shoes,
pharmacy, electronics and home (Appendix 8). PFresh was developed with aim of driving sales by attracting
grocery shoppers to the stores.
xv
According to Tammy Robertson, Target?s spokeswomen, PFresh stores will
provide 90% of the categories and 60% of the products offered at Target SuperStores.
The renovations have been paying off as the addition of food and consumables has enormous traffic-
generating benefits, which have traditionally helped to get the consumer through the front door. Once they
are in the store, Target has the ability to expose more consumers more often to their discretionary product
8
offerings. In addition, the inclusion of food can potentially attract new customers. In 2010 alone, the concept
is giving back: same store sales are expected to increase by an additional 1% due to the PFresh remodels.
CEO Gregg Steinhafel is bullish about the PFresh initiative: “Our store has never been in better condition
and we?ve got two game changing strategies; PFresh and 5% Rewards that will drive our performance in the
4th Quarter and for years to come. I?m more confident than ever that these strategies will deliver incremental
sales while maintaining our current healthy retail operating margin.”
xvi
Next year, another 400 PFresh renovations are slated to get underway, bringing the total count of
PFresh stores to 850. Although this strategy is shifting the capital budget use to store remodeling rather than
new construction, we believe that it will continue to post increasing returns. If the company continues
remodeling at the current pace, completing a chain-wide renovation may take until 2015.
xvii
This change in
store format will also bring about change in product mix, as food begins to account for an increasingly larger
percentage of sales. There have already been hints of this shift demonstrated in the company?s financials: at
the end of the last fiscal year, the food and pet supply category had grown to represent 16% of total sales
compared with 13% two years earlier.
xviii
The challenge for Target is finding a way to link increased traffic to
increased basket-size in areas that are not grocery-related.
We recommend that Target considers moving the grocery section of the PFresh remodel to the back
of the store. Currently most of the perishable and dry consumables are towards the front of the store,
allowing customers to enter the store for groceries and never see any other higher-margin merchandise. If
Target is hoping to increase basket size and get grocery customers to pick up a few other items while in the
store, it would be advantageous to put these items on the customer?s intended path.
Accounting Analysis
Target?s inventory and the related cost of sales are accounted for using the LIFO method, which is
the method they have consistently used in the past. LIFO allows Target to decrease their taxes as their
taxable income decreases because of a higher cost of goods sold. While competitors Wal-Mart and Costco
also use the LIFO method for their domestic operations, they both utilize FIFO for their international
segments, which is in line with industry standards.
9
Target manages its merchandise by entering into arrangements with vendors where they do not
purchase or pay for merchandise until it is sold to the consumer. Merchandise received under the program is
not included in inventory due to the simultaneous purchase and sale of this inventory. Sales made under these
arrangements totaled $1.8 billion in 2009. Based on a gross margin of 29.3%, the annual increase in
inventory in 2009 of $1.27 billion and of $1.09 billion in 2008 would decrease ROA from 6.6% to 6.4%.
Considering an inventory turnover ratio of 6.44x, it can be assumed that there would be an additional $198
million in inventory on the books at any given time. Current assets would increase to $18.2 billion,
increasing Target?s 2009 current ratio from 1.63x to 1.64x.
Long-lived assets are stated at cost for both Target and Wal-Mart. Target reviews assets for
impairment annually and also when events or changes in circumstances indicate that the asset's carrying
value may not be recoverable. This differs from Wal-Mart and Costco, as they only review the assets when
events or changes in circumstances indicate that the asset?s carrying value may not be recoverable. Costco
also reviews long-lived assets for impairment when management makes the decision to relocate or close a
warehouse. Impairment in 2009 totaled $49 million, $2 million in 2008 and $7 million in 2007.
Target?s 2009 revenue growth suffered in the wake of the economic downturn. At 0.6%, this is a
significant decline from the 2004 – 2008 annual average of 9.2%. This year has been more successful as
revenue for the trailing twelve months as of October 2010 is 2.4% above that of 2009. Wal-Mart?s revenue
growth of 0.9% is in line with Target while Costco, at 9.1%, has outperformed the two. Costco?s revenue
growth is attributed to an increase in the cost of gasoline as well as a weakening U.S. dollar, factors that
would not benefit Target.
Target is consistently in excellent position to cover short term liabilities as their current ratio has
averaged 1.5x over the past five years. However, Target does take on significant long-term debt, as shown by
their high debt-to-equity ratio. Target?s three year average of 1.2x is significantly higher than the 2006 and
2005 average of 0.7x. In 2007, long-term debt was increased 74% from $8.7 billion to $15.1 billion mainly
to fund its stock repurchase program. Maturities for these new debt issuances ranged from five to thirty years
(Appendix 9).
10
Target?s accounts receivable turnover ratio is significantly less than that of their competitors because
a large portion of their sales are made with the Target credit card. These sales increase receivables whereas
purchases made with non-Target credit cards do not as they are immediately settled with the third-party
bank. Over the past three years, sales purchased with the Target credit card averaged $3.8 billion and
accounted for 6.0% of total sales. Accounts that were 90 days past due as of January 31, 2010 totaled $371
million, or 2% of current assets. With an allowance for bad debt equaling 14% of average gross credit card
receivables, writing down the remaining $319 million would only increase the accounts receivable turnover
ratio to 8.8x and would decrease the current ratio to 1.60x. Finance charges for these balances are accrued
until the balance is written off once 180 days past due. Target also transfers credit card receivables to a
bankruptcy-remote subsidiary which in turn transfers them to a trust in Target?s name. The trust will
sometimes sell the receivables to a third party in the form of a secured borrowing. Since Target guarantees
the payments to the buyer, these receivables are still accounted for as an asset for Target.
One area where Target can improve is their inventory management. Their 2009 inventory turnover
ratio of 6.4x is well below that of Wal-Mart and Costco (Appendix 10). Since a portion of Wal-Mart?s and
Costco?s inventory is accounted for under FIFO, under which their inventory would be stated at a value less
than under LIFO, the discrepancy between Target and its competitors is magnified. This demonstrates that
Target carries too much inventory, which is an inefficient use of the firm?s resources. A second example of
this is their relatively high average days inventory outstanding (Appendix 10), indicating that it takes Target
too long to turn its inventory into sales.
Financial Analysis
Capital Expenditures
The majority of Target's capital expenditure has been allocated to new store openings, remodeling
and information technology upgrades.
xix
Since 2004, the company dedicated at least 60% of its capital
spending to new store openings. However, in 2009 the pattern slightly changed with the new store openings
and store remodeling and expansion accounting for 52% and 17% of total CapEx, respectively. We believe
that this deviation can be attributed to both poor economic conditions in 2009 and to planned grocery
11
additions. As disclosed in the 2010 10-K report, Target looks to open between 20 and 30 stores in 2011 after
slightly less ambitious growth in 2010, during which 13 stores were opened. The company planned to
increase its CapEx budget in 2010 to between $2.0 and $2.5 billion after spending only $1.7 billion in 2009,
which was the lowest by Target since 1999. However, the 2009 figure is not surprising since the company
relies heavily on "public debt markets to raise capital for new store developments and other capital
expenditure."
xx
With the capital market liquidity crisis behind us and strong retail growth over the holiday
season, Target is expected to slowly expand its CapEx spending in 2010 and beyond.
Financing
As mentioned above, Target has been sponsoring its CapEx through the issuance of public debt and
the use of internal funds. The company's repurchase has exceeded the issuance of common stock every year
since 1998, with the exception of 2002.
xxi
Meanwhile, the issuance of debt securities has exceeded their
repurchases by $10.7 billion over the same time frame. Specifically, the company's borrowing has consisted
of the issuance of unsecured debt obligations, non-recourse debt backed by the credit card receivables and
short-term commercial paper. Target also has access to a $2 billion credit line which can be used in
conjunction with the commercial paper issuances for holiday spending. The company has recently increased
the proportion of borrowing through non-recourse debt obligations. These obligations reached 27% and 29%
of total debt for 2009 and 2008, respectively, after having been below 20% since 2001. As disclosed in the
2010 10-K report, Target's non-recourse debt accrues interest expense tied to the floating LIBOR rate (plus
premium), thus exposing the company to some market risk. However, with LIBOR currently at an all-time
low,
xxii
the company finds the floating rate more attractive than a fixed borrowing rate.
Stock Buy Back
In November 2007, Target?s Board of Directors instituted a stock repurchase plan in the amount of
$10 billion, which replaces a $3 billion repurchase plan that was approved in June 2004. At the time of the
approval, the $10 billion represented approximately 20% of the outstanding shares. A benefit of
implementing this three-year plan was to increase the use of debt in the firm?s capital structure, which was
12
the primary source of financing for the repurchase. In September of that year, Target came out with an
objective to achieve a credit profile that would maintain an “A” rating with respect to its long-term debt.
xxiii
The program was halted one year later due to liquidity issues related to the economic downturn. In January
of this year, the program was re-instituted due to the strength of business operations, adequate liquidity and
better conditions in the capital markets. So far this year, Target has acquired over $2 billion of its stock,
signaling that the company viewed its stock as under-priced. After spending the remaining $2.6 billion on
additional shares, the company should look into new projects instead of continuing the buy-backs and
accumulating retained earnings. Target has not engaged in any major initiatives, outside of store remodeling
to accommodate grocery section, since 2004 when it sold department store chains Mervyn?s and Marshall
Fields.
Canada in the News
Target?s growing interest in Canada was discussed in a Wall Street Journal article posted on October
6.
xxiv
According to the CFO of Canadian real estate development company RioCan, Target is exploring
opening its first stores outside of the U.S. in 2014 - 2015. These discussions hint at the move to Canada will
differ from Wal-Mart?s entrance, which involved the purchase of 122 Woolco stores in 1995.
xxv
Since then,
Wal-Mart has expanded to 322 stores across the border. Target?s move to Canada seems like a lucrative
project in which to invest after the share-repurchase program ends. Expanding into Canada would help with
its overexposure to U.S. economic conditions. The Canadian retail industry was able to weather the
economic downturn significantly better than Target and other U.S. retailers (Appendix 14). Wal-Mart?s
presence in international markets helped the company to outperform both Target and the S&P 500 index
during the past recession (Appendix 15), with their international sales growing faster than the U.S. sales.
xxvi
Target?s move to Canada can be a first step in achieving a similar level of protection from an under-
performing domestic market.
In addition to Wal-Mart, Target will have to contend with HBC?s Zellers, operating 279 mass
merchandise stores, and HBC?s Fields, which has 196 locations and offers highly discounted
merchandise.
xxvii
However, we believe that the move to Canada is worth pursuing since the country offers
13
political and economic stability, does not present a logistical challenge and provides future growth potential
(Appendix 18 & 20).
Conclusion
Overall, we feel the company has been performing well and is poised for future growth. With a few
suggestions, Target can become an even more relevant brand, dynamic retailer and can become a player in
global retail markets. Opportunities exist in:
-Expanding its operations to Canada
-Returning to focusing on its full brand promise
-Continued development of products for the up&up portfolio
-Relocating the PFresh concept to the back of the store
14
Appendix 1:
15
Appendix 2:
ATTRIBUTES TARGET WALMART COTSCO SEARS
HOLDING
DOLLAR
GENERAL
CORP
Number of
Stores
1,753 2,932 413 3,519 8,100
State
Presence
49 49 40 42 35
Positioning “Expect more. Pay
Less”
“Save Money.
Live Better”
Membership
format.
Discounted
prices
“Money
well Spent”
“30% of
products
sold are
less than
$1"
Financial
Services
YES NO NO NO NO
Store Brands up&up, Archer’s
Farm,
Choxie,
Sutton&Dodge,
Market Pantry,
Wine Cube and
Circo
Sam’s Choice,
Great Value,
Equate, Ol’Roy,
Parent’s Choice,
White Stag,
George
Kirkland Kenmore,
Craftsman,
Die Hard
NO
Consumer Skewed females,
average HH
income
$ 60,000; well
educated.
Average age 42
Average HH
income less
than $45,000;
minority groups
60% has
income higher
than $55,000
Mix
consumer
demograph
ics
41% earns
less than
$30,000
14% earns
$20,000
16
Appendix 3:
Examples of prior ad campaigns for Target. These are examples of Target?s trendy, chic, fun, design-
conscious advertisements.
17
Appendix 4:
Example of Target?s new focus on “Pay Less.” This ad lacks Target?s token personality. It is generic and
could easily be mistaken for or used as an advertisement for many of Target?s competitors.
18
Appendix 5:
Wal-Mart?s logo and motto switch in 2008. New logo and motto have less focus on price.
19
Appendix 6:
Danger exists for Target if it ends up in the same low cost, high quality space that Wal-Mart is fighting to
enter
CUSTOMER PERCEPTION – Cost and Quality
20
Appendix 7:
Old vs. New Target Brand Product
21
Appendix 8:
Pfresh Store Concept
22
Appendix 9:
Maturity dates of long-term debt.
8,271
3,232
213
326
905
3,500
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2010-2014 2015-2019 2020-2024 2025-2029 2030-2034 2035-2037
Long-Term Debt Maturities
(in millions)
23
Appendix 10:
24
Appendix 11:
A
c
c
o
u
n
t
i
n
g
M
e
t
r
i
c
s
:
2
0
0
0
–
Q
3
2
0
1
0
25
Appendix 12:
Source: www.auditintegrity.com
In September, Audit Integrity placed Target in the 55th percentile among all companies, indicating higher
accounting and governance risk than 45% of companies.
26
Appendix 13:
Cost of Construction: Big Box Building
27
Appendix 14:
U.S. and Canada's Economic Conditions
Below you will find comparison data for GDP performance for the U.S.
xxviii
and Canada
xxix
in the retail sector
shortly before the recession of 2009.
During 2009, we know that Canada's retail portion of the GDP reversed the growth trend and decreased
.37%. Although the U.S. Retail sector's GDP for 2009 has not been made available by the Bureau of
Economic Analysis (BEA), we suspect that 2009 Retail output underwent another significant drop in growth.
This can be derived from the information on the value added by the retail sector in 2009
xxx
, which dropped
additional 2.74%.
Another economic indicator of Canada's economic stability is the country's unemployment data
xxxi
.
Compared to the U.S.
xxxii
, unemployment in Canada has been historically slightly higher. However, during
5%
2%
-2%
6%
4%
3%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2006 2007 2008
GDP Growth in Retail Sector
U.S. % Retail GDP
Change
Canada % Retail GDP
Change
4.32%
2.03%
-3.01%
-2.74%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
2006 2007 2008 2009
% Change in Retail Value Added to
GDP (U.S.)
% Change in Retail Value
Added to GDP (U.S.)
28
the global economic downturn, the country did not experience the same level of rise in their unemployment
as did the U.S. Recent unemployment data in Canada points to an overall unemployment rate drop to 7.3%
for 2010, with retail and wholesale sectors' employment growing by 2.2% compared to last year.
6.8%
6.3%
6.0%
6.1%
8.3%
5.1%
4.6% 4.6%
5.8%
9.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2005 2006 2007 2008 2009
Unemployment as % of Labor Force
Unemployment, Canada
Unemployment, US
29
Appendix 15:
International Markets Helping Wal-Mart During Poor Domestic Economic Conditions
As discussed above, we believe that Wal-Mart's exposure to international markets contributed to their steady
performance during the recent recession. Wal-Mart's total sales received a boost from international markets,
including Canada, with the international segment's sales growing 1.3% and 9.1% in 2009 and 2008,
respectively. These numbers eclipsed Wal-Mart's U.S. sales growth of 1.1% and 6.9% (not including Sam's
Club, which experienced negative growth) for the same time period, and the international segment is now
contributing 24.7% of the company's total sales.
xxxiii
Combined with the company's appeal to extremely price conscious consumers, Wal-Mart's international
segment helped the company perform relatively well compared to Target during the tough economic
conditions of 2009.
Even though Target is experiencing strong stock performance coming out of 2009, we feel that expansion
abroad will be a good step to help the company's performance during poor domestic economic conditions.
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
Wal-Mart Stores Inc. (NYSE:WMT) - Share Pricing
Target Corp. (NYSE:TGT) - Share Pricing
30
Appendix 16:
Beta Calculations
In order to calculate Target's WACC we looked at the company's daily stock prices from 11/30/1990 to
11/30/2010.
xxxiv
Subsequently, we compared percentage changes in company's stock price to percentage
changes in the S&P 500 index for the same time period using linear regression. This method enabled us to
derive the company's Equity Beta value of 1.095.
Our sensitivity analysis in Appendix 15 also included Equity Beta value of 1.066 derived from examining
company's performance against S&P 500 for the last 10 years.
y = 1.0951x + 0.0004
R² = 0.3466
-0.2
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
-0.15 -0.1 -0.05 0 0.05 0.1 0.15
Target's Equity Beta Estimate (20 yr comparison to S&P 500)
y = 1.0665x + 0.0004
R² = 0.3821
-0.15
-0.1
-0.05
0
0.05
0.1
0.15
0.2
-0.15 -0.1 -0.05 0 0.05 0.1 0.15
Target's Equity Beta Estimate (10-yr comparison to S&P 500)
31
Appendix 17:
WACC Sources and Calculations
? Equity Beta - regression analysis
? Cost of Debt and Market Risk premium were obtained from Bloomberg
xxxv
? 10-year T-Bill yield as of December 2 was obtained from the U.S. Department of Treasury site
xxxvi
? Tax Rate - obtained from 10K report through Capital IQ
xxxvii
? Market Capitalization and recent 10Q numbers for Cash and Short Term Inv., Current Portion of LT
Debt and LT Debt were obtained from Capital IQ
xxxviii
Target WACC calculation using Equity Beta, which was derived by comparing company's daily stock
price to S&P 500 for the past 20 years
Equity Beta 1.0951
Risk Free Rate 10-year T-bill 3.01%
Market Risk Premium 8.06%
Cost of Equity 11.84%
Cost of Debt (before taxes) 3.81%
Tax Rate 35.70%
Cost of Debt 2.45%
Market Capitalization $ 41,741.4
Cash and Short Term Inv. $ (936)
Current Portion of LT Debt $ 850
Long Term Debt $ 15,680
Total Enterprise Value $ 57,335.4
Equity Share 71%
Debt Share 29%
WACC 9.13%
Target WACC calculation using Equity Beta, which was derived by comparing company's stock price
to S&P 500 for the past 10 years
Equity Beta 1.0665
Risk Free Rate 10-year T-bill 3.01%
Market Risk Premium 8.06%
Cost of Equity 11.61%
Cost of Debt (before taxes) 3.81%
Tax Rate 35.70%
Cost of Debt 2.45%
Market Capitalization $ 41,741.4
Cash and Short Term Inv. $ (936)
Current Portion of LT Debt $ 850
Long Term Debt $ 15,680
Total Enterprise Value $ 57,335.4
Equity Share 71%
Debt Share 29%
WACC 8.97%
32
Appendix 18:
Overview of Valuation Assumptions and Sensitivity Analysis for Target Stock Prices
xxxix
? Our WACC estimates of 9.13% and
8.97% are based on the Beta
calculations discussed in Appendices 4
and 5. The WACC of 8.45% is a
Bloomberg reported WACC.
? 2.4% growth in perpetuity comes from
the Congressional Budget Office
forecast for GDP growth for 2015-
2020.
xxix
2.8% growth estimate is the
average GDP growth experienced in
the retail sector from 1999-2009 based
on the data from the Bureau of
Economic Analysis. The 3.0% estimate
is an optimistic economic growth case.
33
Appendix 19:
Details on DCF Assumptions and DCF Base Case Results
Sales Growth
? As disclosed on the previous slide, our revenue growth is projected based on the IBIS industry
reports and average GDP performance in the retail sector for Canada and the U.S. for years that
industry reports do not cover (See Appendix 17 for details on growth estimates). To come up with
our growth estimates, we averaged the growth forecasts for the U.S. Warehouse Clubs and
Supercenters
xl
, and Dollar and Variety
xli
stores since Target operates and competes in these two retail
sectors (for years in which retail forecasts are available). In addition, our growth forecast includes
contributions from openings of new stores. We estimated new stores annual contribution to total
revenues to equal ~$33.7 million based on the average 2004-2010 new store contributions calculated
based on the company's 10K disclosures.
? We estimated Target's Credit Card segment sales to decrease by 17% in 2010 based on the 10Q
disclosure. We forecasted the sales to stabilized in 2011 before growing analogous to store sales
growth from 2012-2019.
Expenses
? We estimated SG&A to stay at 20% of Target's Sales based on the 10yr historic average.
? We estimated COGS to remain at 70.2% of Target's Sales based on company's recent 10Q.
disclosure. This is a slightly more conservative estimate than the 10yr historic average.
? Credit card expenses are forecasted to decrease by ~37% based on the recent company disclosure.
We estimated the credit card expense to decrease an additional 10% as credit card delinquencies
improve with better economic conditions before growing with the credit card revenues thereafter.
Depreciation and Amortization:
? We estimated D&A to grow by 10.8% annually based on historic
average.
Key Working Capital Items:
? We estimated accounts receivable to grow with the sales revenue growth.
? We estimated inventories and accounts payable to grow based on the
yearly growth of COGS.
34
Appendix 20:
Details on Revenue Growth Estimates
Revenue Growth Projections are based on the number of store openings, industry reports data and GDP
growth in the retail sector for the U.S. and Canada.
** A spike in revenue growth for 2015 and 2016 for the best case scenario, which includes store openings in
Canada, is based on the Wal-Mart's international sales contribution of 1.1% to total sales growth after its
expansion to Canada in 1995
xlii
. Although Wal-Mart reported a 2.1% contribution to its total sales growth the
following year, we took a conservative estimate and increased sales growth by another 1.1%, due to the
smaller number of store openings Target is planning compared to Wal-Mart.
35
Appendix 21:
SWOT Analysis for Target Corporation
STRENGTHS
Brand Equity – Target is one of the most
recognizable brands in the US
Strong brand loyalty amongst consumers
2
nd
largest retailer in the US
Image of cleanliness, fashion, design-
forward thinking
Exclusive partnerships
REDcard
5% Rewards
WEAKNESSES
Consumer perception that prices are
slightly higher than competitors
No international presence
Product mix is heavily skewed towards
discretionary items ? not as recession
proof
Current divergence from full brand
promise of “Expect More, Pay Less”
OPPORTUNITIES
Store remodeling ?Expanding PFresh
concept
up&up brand growth
Increased online sales
Expansion into Canada
Urban store expansion
Growth in social media
Shopkick
THREATS
Competitors trying to move into a more
upscale image
Expanding grocery options with PFresh
could lead to lower margins
Competitors aggressively lowering prices
Shifts in economy that will push consumers
to competitors
36
Citations
i
Harvard Business School, Bullseye: “Target’s Cheap Chic Strategy”, August, 16, 2004
ii
Alice Z. Cuneo, "Francis's Mission: Shore Up Target's Sales by `Owning Red,"' Advertising Age, 24 February 2003
iii
Steve McKee, “What Should you spend on Advertising”, Business Week, February 10, 2009
iv
Robert J. Andrews, Department Stores in the US, IBIS, Industry Report 45211, September 2010
v
Casey Thomas, Warehouse Clubs & Supercenters in the US, IBIS Industry Report 45291, September 2010
vi
Zmuda, Natalie. “Retailers Fear Cheap Chic is not Cheap Enough in Down Economy,” Advertising Age, August 2008.
vii
Mirhaydari, Anthony. “Wal-Mart vs. Target: Who’ll win the recovery?,” MSN Money, May 14, 2010.
viii
Steverman, Ben. “Target versus Walmart; The Next Phase,” Bloomberg Business Week, August 18, 2009.
ix
Target Pressroom. “Target Introduces the Great Save.” http://pressroom.target.com/pr/news/target-introduces-the-
great-save.aspx January 2010.
x
Gregory, Sean. “Walmart’s Latest Move to Crush the Competition,” TIME, September 9, 2009.
xi
“All About Balance in 2010.” Target News Now, January 26, 2010.
xii
Target Pressroom. “Target up&up Brand Offers Great Quality at Low Prices,”
http://pressroom.target.com/pr/news/up-and-up-release.aspx June 2009.
xiii
Mirhaydari, Anthony. “Wal-Mart vs. Target: Who’ll win the recovery?,” MSN Money, May 14, 2010.
xiv
Target Pressroom. “Target up&up Brand Offers Great Quality at Low Prices,”
http://pressroom.target.com/pr/news/up-and-up-release.aspx June 2009.
xv
Mirhaydari, Anthony. “Wal-Mart vs. Target: Who’ll win the recovery?,” MSN Money, May 14, 2010.
xvi
“Setting the Bar High.” Target News Now, November 23, 2010.
xvii
“PFresh Pause Gives TGT Time.” Target News Now. October 5, 2010.
xviii
“PFresh Delivers Traffic Gift.” Target News Now. October 26, 2010.
xix
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xx
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxi
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxii
LIBOR Historical Data. http://www.wsjprimerate.us/libor/libor_rates_history.htm
xxiii
Target Corporation. "Target Corporation to Review Ownership Alternatives for Credit Card Receivables; Company
Also to Analyze Capital Structure." http://investors.target.com/phoenix.zhtml?c=65828&p=irol-
newsArticle&ID=1051094&highlight September 12, 2007.
xxiv
Talley, Karen and Andy Georgiades. "Target Explores Canadian Locations." WSJ Online.
http://online.wsj.com/article/SB10001424052748704689804575536273265184134.html October 6, 2010.
xxv
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxvi
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxvii
Hudson Bay Company. http://www.hbc.com/hbc/about/default.asp
xxviii
Bureau of Economic Analysis website. http://www.bea.gov/industry/gdpbyind_data.htm
xxix
Statistics Canada website. http://www40.statcan.gc.ca/l01/cst01/econ41-eng.htm
xxx
Bureau of Economic Analysis website. http://www.bea.gov/industry/gdpbyind_data.htm
xxxi
Human Resources and Skills Development Canada website. http://www4.hrsdc.gc.ca/[email protected]?iid=16
xxxii
US Bureau of Labor and Statistics website. ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt
xxxiii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxxiv
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
37
xxxv
Bloomberg Professional. Accessed through Bloomberg Terminal at the Nicholas Center for Corporate Finance and
Investment Banking.
xxxvi
U.S. Department of Treasury website. http://www.treasury.gov/resource-center/data-chart-center/interest-
rates/Pages/TextView.aspx?data=yield
xxxvii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxxviii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
xxxix
Congressional Budget Office Report. http://cbo.gov/ftpdocs/117xx/doc11705/08-18-Update.pdf August 2010.
xl
Thomas, Casey. "Warehouse Clubs & Supercenters in the US." IBIS Industry Report 45291. September 2010.
xli
Hamilton, Taylor. "Dollar and Variety Store in the US." IBIS World Industry Report 45299. September 2010.
xlii
Capital IQ Data. Source for Target's, Wal-Mart's, Costco's 10K and 10Q reports from 1996-2010.
http://www.capitaliq.com
doc_694587148.pdf