Target Corporation

Sector: Food, drug and mass retailers Country of operation: US Key product categories: Apparel and accessories, beauty, food and beverage, hardlines, home furnishings and décor, and household essentials Annual Metrics [caption id="attachment_147923" align="aligncenter" width="700"] Fiscal year ends early February or late January of the following calendar year. FY21 ended January 29, 2022[/caption]   Summary Founded in 1902 and headquartered in Minneapolis, Minnesota, Target is one of the largest discount retailers in the US, offering daily essentials and fashionable, differentiated merchandise at discounted prices through its physical stores and online platform. Its product categories include apparel and accessories, beauty and household essentials, food and beverage, hardlines, and home furnishings and décor: Its stores offer an assortment of food and beverages, including dairy products, dry groceries, frozen items and perishables, while its digital channels offer selected online exclusives, such as additional sizes and colors of certain products. Its stores are mainly located in urban markets and on college campuses. As of January 30, 2022, the company operates 1,926 stores and 46 distribution centers across the US. For its fourth quarter of 2021 (ended January 29 ), Target posted $30.6 billion in revenue, up 17% year over year, and $1.54 billion in net earnings, up 3.8%. Company Analysis Coresight Research insight: Target is one of the most well-established retail brands in the US, with a reputation for offering a wide range of general merchandise and everyday essentials at an affordable price range, through its stores and digital platform. It stands apart from its competitors by providing a differentiated shopping experience—through a combination of its strategic pricing mechanism and its convenience, customer service, loyalty programs, marketing programs, merchandise assortment and store environment. Almost all Target’s stores that are larger than 170,000 square feet offer a full line of food products similar to traditional supermarkets, while its small-format stores, generally less than 50,000 square feet, provide curated general merchandise and food assortments. The stores also act as fulfillment points to improve product availability and delivery times and reduce shipping costs. Target’s solid online presence and its comprehensive network of physical stores and warehouses meant it was better positioned than its peers to face the pandemic. Its physical stores and warehouses remained operational during the peak of the pandemic, and customers were able to shop using curbside pickup, drive-or instore retrieval of orders from Shipt, the company’s online delivery app. Necessities such as food, beverages and healthcare items spurred Target’s growth during the crisis. Target remains bullish on expansion—in 2021 alone, it opened 32 stores. However, ongoing labor and supply-chain challenges, coupled with its continuing expansion of physical stores, may put pressure on Target’s profit margins and its ability to maintain its pandemic-driven momentum.

Tailwinds

Headwinds

Strong brand portfolio that has continued to grow through constant investments and innovation to support its operating and financial model Omnichannel retail platform, integrating physical and digital shopping for further brand growth Wide variety of products, continuously offering new and exclusive brands to offer customers greater choice Quality customer shopping experience with high customer loyalty may attract new customers

Supply chain challenges that may continue into a post-pandemic economy Upward pressure on costs that calls for corporate response Compound pressure on profit margins due to the aforementioned headwind combined with ongoing expansion

  Strategy Target aims to differentiate itself and remain competitive by offering a wide variety of products as conveniently as possible, carefully curating its assortment, loyalty programs, marketing efforts and store environment. According to annual reports for its past two fiscal years (ended January 30, 2021, and February 1, 2020), three key areas form the focus of its strategy: 1. Improve store footprint, technology and supply chain infrastructure

• Improve store footprint by remodeling existing stores and adding new ones
• Improve customer experience through investments and acquisitions in technology
• Enhance supply chain and inventory management systems, increasing accuracy and efficiency

2. Expand brand portfolio, fulfillment capabilities, delivery and expert services

• Add inventory capabilities at optimal costs through its entire supply chain, to keep items in stock, maintain positive vendor relationships and plan inventory levels for apparel and seasonal items to minimize markdowns
• Curate the right mix of products through multiple collections at the right prices
• Improve and expand its digital platform along with its fulfillment capacity and services for a better customer experience
• Develop and expand private labels in such categories as grocery and apparel to better control price structures and supply chains

3. Invest in employees

• Invest continuously in employee development
• Invest in hours, training and wages

Revenue Breakdown (FY21) [caption id="attachment_147921" align="aligncenter" width="480"] Source: Annual Report 2021[/caption]   Company Developments

Date	Development
May 1, 2022	Employees in a Virginia store file for a union election, with more locations to follow
April 27, 2022	Settles lawsuit alleging false advertising and overpricing for $5M
October 18, 2021	Enters into a five-year credit agreement with certain lenders, with the Bank of America as administrative agent and Citibank as syndication agent, for a $3.0 billion unsecured revolving credit facility
September 22, 2021	Reports the election of David P. Abney and Gail K. Boudreaux as Directors, effective August 11, 2021, and September 23, 2021, respectively
September 1, 2021	Announces that Executive Vice President and Chief Information Officer (CIO) Michael E. McNamara plans to retire in 2022
August 25, 2021	Names Sarah Travis President of Roundel, the retailer’s in-house media company
August 23, 2021	Announces plans to expand the number of Disney stores at Target locations to over 160 across the country and that Bullseye’s Top Toys will return list this holiday season
August 11, 2021	Announces that its Board of Directors has elected two new Directors: David P. Abney, former Chairman of the Board and Chief Executive Officer of United Parcel Service Inc., and Gail K. Boudreaux, President and CEO of Anthem
August 9, 2021	Announces The Fall Designer Collection, featuring four limited-time-only design partners: Rachel Comey, Victor Glemaud, Sandy Liang and Nili Lotan
July 26, 2021	Announces a fall collaboration with author, illustrator and animator Christian Robinson known for his best-selling children’s books, You Matter and Another
July 21, 2021	Shares details about Ulta Beauty at Target, slated to begin rolling out in August in more than 100 Target stores nationwide and online, featuring more than 50 specially curated prestige brands
June 22, 2021	Announces a new sustainability strategy, Target Forward
April 27, 2021	Announces a Spring collaboration with Instagram influencer, plant enthusiast and interior stylist Hilton Carter
April 19, 2021	Launches collaborations with ALEXIS, Christopher John Rogers and RIXO on a limited-time-only collection of more than 70 dresses
April 7, 2021	Commits to spending more than $2 Billion on Black-owned businesses by 2025, aiming to engage more Black-owned companies, enhancing its retail operations and shopping experience
March 2, 2021	Announces a $4 billion strategic investment annually over several years to continue scaling its capabilities across its retail platform
February 25, 2021	Enters into a partnership with Apple to enhance its shopping experience for its customers, including specialized training for Target team members from Apple
January 26, 2021	Partners with Levi Strauss to offer a limited-edition collection featuring an assortment of home and lifestyle items

  Management Team

• Brian C. Cornell—CEO and Chairman of the Board
• Michael J. Fiddelke—CFO and Executive VP
• John J. Mulligan—COO and Executive VP

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Source: Company reports/S&P Capital IQ