Target Corporation - Research Paper Example

?Memorandum 05/02 Re: Target Corporation is the second largest discount retailer in the world and is centered in the Minneapolis, Minnesota area. From the downtown Minneapolis community, the company grew into the surrounding community, opening its first store in nearby Roseville in 1962. From those humble beginnings, nearly a half-century ago, Target has grown into a formidable presence in the discount retail market. With nearly $67 billion per year in revenue, over 355,000 employees, and 1,750 locations throughout the United States, it trails only Wal-Mart in terms of market share. Upon this foundation, Target is expanding its business operations internationally. It hopes to start retail chains in Canada by 2013. By moving across borders, Target will follow and provide competition for Wal-Mart. Consequently, it will continue to grow and fund additional projects such as expansion through acquisitions. The success of Target is largely attributable to the culture of the organization, which stresses honesty and community (Rowley 145). In this examination of Target Corporation, we hope to accomplish a comprehensive look at the company’s history, financials, capital, reputation, marketing, and future. This all-inclusive view of the company can thus be evaluated in terms of how Target would like to perceive and how the public actually sees Target Corporation as an asset (or a liability) in their communities. Human Capital Target Corporation employs roughly 355,000 employees throughout the United States, who take part in a variety of operational functions such as managing stores, marketing, and customer service (SEC). Employees at Target are generally happy; however, there is some criticism of compensation and benefit packages offered by the company. For instance, it is alleged by labor groups and current employees that Target, based out of Minneapolis, pays less in some cases than their competitor Wal-Mart. does According to a recent survey by UFCW, Target pays entry-level positions a salary of about $6.25 per hour to $8 per hour, depending on qualifications (Serres). This is below- or at-the-market in terms of large retail chains. Therefore, even though Wal-Mart is often the subject of criticisms and community rejection, it seems that Target has a similar pay scheme for low-level employees to their competitor. In terms of benefits, union groups see Target as less equitable than its competitors do. In the early 2000s, Target dropped all health care insurance coverage for part-time workers, while Wal-Mart has maintained its medical plan available to all workers (Serres). However, many employees still agree that it is a better place to work than some other large retail chains, despite the weaknesses in the health care insurance program. Target’s benefits packages rate high in terms of flexibility for higher-level employees. The 401(k) plans offered by Target considered some of the best in the industry insofar as it matches dollar for dollar up to five percent of contributions made by employees. In addition, Target offers many other programs including the “Take Charge of Education” program that allows Target credit-card holders to donate 1 percent a year of their purchases to a school of their choice. This is in line with Target’s explicit commitment to the value of family (Rowley 146). Union Involvement Target Corporation is like Wal-Mart in the fact that they are not unionized. In fact, Target sees unionization as a potential threat to their corporate success (Rowley 141). For that reason, the company has published anti-video literature and videos in order to warn their employees about the dangers of a union. Deborah Weinswig, an analyst with Salomon Smith Barney, said that, “Target is not a union, so it can charge lower prices than other food retailers. In the Northeast, SuperTargets have done extremely well” (Rowley 174). This lends credence to the view that Target would be negatively affected by a unionization of its employees. These efforts were increased in 2009 in response to an Obama Administration proposed legislation to make unionization easier (Rosenkrantz). Target even went as far as to hire outside labor-relations consultants as a preemptive strike against unionization campaigns and required employees to sit through anti-union meetings and seminars. Pending Litigation As a major corporation, Target is the subject of a variety of different class action and individual lawsuits. In April 2011, for instance, a lawsuit was brought against Target by a Pennsylvania woman because the company used false affidavits “to go after customers who allegedly owed money to a subsidiary bank that issues the store's credit cards” (AP). The class action lawsuit is filed on behalf of thousands of Target customers who have repaid Target debts, paid legal fees, lost lawsuits, or had credit scores damaged because of debt collections using the allegedly false affidavits. The defendants are seeking an undisclosed amount of money. This lawsuit is the predictable outcome of successful settlements with a number of other defendants in civil cases. In 2009, Target settled a lawsuit with New Jersey for $375,000 after the company was accused of selling expired baby formula and charging prices different from advertised at the checkout counter (Megerian). Additionally, Target has been taken to court with charges of contracting with sweatshop labor and of violating equal employment opportunity standards. Current Ownership Approximately 88% of Target Corporation stock shares are held by institutional investors and mutual fund owners. The largest of these institutional interests are State Street Corporation and Capital Research Global Investors who hold a 9.04% (valued at $3.7 billion) and a 4.69% (valued at $2 billion) stake respectively (Yahoo! Finance). The major direct holders, in order of size of shares owned, are Gregg Steinhafel (chief executive officer), Kathryn Tesija (Vice President of Merchandising), Douglas Scovanner (chief financial officer), John Griffith, and Michael Francis (chief marketing officer). As of January 2011, Steinhafel owned approximately 400,000 shares, which is about .057% of the 693 million shares outstanding. Financial Data Balance Sheet Target Corporation’s Balance Sheet from 2009 to 2011 demonstrates a healthy growth for the company through that period. The company’s assets are becoming liquid, which may reflect a plan to make significant long-term investments in tangible assets such as buildings, inventories, and acquisitions. Additionally, Target has decreased its liabilities for three straight years. Period Ending Jan 29, 2011 Jan 30, 2010 Jan 31, 2009 Assets Current Assets Cash And Cash Equivalents 1,712,000 2,200,000 864,000 Short Term Investments - - - Net Receivables 6,153,000 6,966,000 8,084,000 Inventory 7,596,000 7,179,000 6,705,000 Other Current Assets 1,752,000 2,079,000 1,835,000 Total Current Assets 17,213,000 18,424,000 17,488,000 Long Term Investments - - 163,000 Property Plant and Equipment 25,493,000 25,280,000 25,756,000 Goodwill - - 60,000 Intangible Assets - - 171,000 Accumulated Amortization - - - Other Assets 999,000 829,000 862,000 Deferred Long Term Asset Charges - - - Total Assets 43,705,000 44,533,000 44,106,000 Liabilities Current Liabilities Accounts Payable 9,951,000 9,631,000 9,250,000 Short/Current Long Term Debt 119,000 1,696,000 1,262,000 Other Current Liabilities - - - Total Current Liabilities 10,070,000 11,327,000 10,512,000 Long Term Debt 15,607,000 15,118,000 17,490,000 Other Liabilities 1,607,000 1,906,000 1,937,000 Deferred Long Term Liability Charges 934,000 835,000 455,000 Minority Interest - - - Negative Goodwill - - - Total Liabilities 28,218,000 29,186,000 30,394,000 Stockholders' Equity Misc Stocks Options Warrants - - - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 59,000 62,000 63,000 Retained Earnings 12,698,000 12,947,000 11,443,000 Treasury Stock - - - Capital Surplus 3,311,000 2,919,000 2,762,000 Other Stockholder Equity (581,000) (581,000) (556,000) Total Stockholder Equity 15,487,000 15,347,000 13,712,000 Net Tangible Assets 15,487,000 15,347,000 13,712,000 Prepared by (Yahoo! Finance) Income Statement The total revenue of Target Corporation has increased from 2009 to 2011, which indicates that the company is growing and becoming more effective with the use of its assets. In addition, this means that common shareholders are making greater returns on their investment, which could attract greater capital for investment in the long-term success of Target. Period Ending Jan 29, 2011 Jan 30, 2010 Jan 31, 2009 Total Revenue 67,390,000 65,357,000 64,948,000 Cost of Revenue 45,725,000 44,062,000 44,157,000 Gross Profit 21,665,000 21,295,000 20,791,000 Operating Expenses Research Development - - - Selling General and Administrative 14,329,000 14,599,000 14,563,000 Non Recurring - - - Others 2,084,000 2,023,000 1,826,000 Total Operating Expenses - - - Operating Income or Loss 5,252,000 4,673,000 4,402,000 Income from Continuing Operations Total Other Income/Expenses Net (80,000) (94,000) (139,000) Earnings Before Interest And Taxes 5,172,000 4,579,000 4,263,000 Interest Expense 677,000 707,000 727,000 Income Before Tax 4,495,000 3,872,000 3,536,000 Income Tax Expense 1,575,000 1,384,000 1,322,000 Minority Interest - - - Net Income From Continuing Ops 2,920,000 2,488,000 2,214,000 Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income 2,920,000 2,488,000 2,214,000 Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares 2,920,000 2,488,000 2,214,000 Prepared by (Yahoo! Finance) Stock Prices Target Corporation (ticker: TGT) has seen healthy increases in its stock prices from 2008 to 2011. Although this may be due to significant world market trends in prices of stock, Target has met or exceeded the general trend in the worldwide economic recovery. Date Open Close Avg. Vol. Adj. Close May 2, 2011 49.34 49.17 13,025,500 49.17 Apr 1, 2011 50.07 49.10 6,708,700 49.10 Mar 1, 2011 52.69 50.01 7,928,200 50.01 Feb 1, 2011 54.65 52.55 9,369,400 52.55 Jan 3, 2011 60.26 54.83 8,716,300 54.58 Dec 1, 2010 57.60 60.13 4,350,900 59.85 Nov 1, 2010 52.38 56.94 6,249,500 56.68 Oct 1, 2010 53.78 51.94 5,686,200 51.46 Sep 1, 2010 51.62 53.44 5,074,800 52.95 Aug 2, 2010 51.59 51.16 6,404,700 50.69 Jul 1, 2010 48.99 51.32 6,465,500 50.60 Jun 1, 2010 54.27 49.17 6,987,600 48.48 May 3, 2010 56.96 54.53 8,535,700 53.76 Apr 1, 2010 52.76 56.87 5,869,200 55.90 Mar 1, 2010 51.77 52.60 4,444,300 51.70 Feb 1, 2010 51.55 51.52 7,703,900 50.64 Jan 4, 2010 48.47 51.27 8,735,300 50.22 Dec 1, 2009 47.08 48.37 7,537,300 47.38 Nov 2, 2009 48.62 46.56 9,175,100 45.61 Oct 1, 2009 46.52 48.43 7,824,100 47.28 Sep 1, 2009 46.72 46.68 7,658,600 45.57 Aug 3, 2009 43.95 47.00 10,385,300 45.88 Jul 1, 2009 39.64 43.62 8,588,400 42.41 Jun 1, 2009 39.87 39.47 9,860,900 38.37 May 1, 2009 40.38 39.30 12,077,000 38.21 Apr 1, 2009 33.93 41.26 12,897,200 39.95 Mar 2, 2009 27.79 34.39 14,295,500 33.30 Feb 2, 2009 30.25 28.31 17,941,700 27.41 Jan 2, 2009 34.64 31.20 11,966,600 30.05 Dec 1, 2008 33.27 34.53 12,921,400 33.26 Nov 3, 2008 40.10 33.76 15,405,300 32.51 Oct 1, 2008 48.51 40.12 19,117,000 38.44 Sep 2, 2008 54.99 49.05 16,089,800 47.00 Aug 1, 2008 45.52 53.02 11,280,600 50.80 Jul 1, 2008 45.95 45.23 11,249,900 43.21 Jun 2, 2008 53.54 46.49 11,849,900 44.41 May 1, 2008 52.96 53.36 9,414,300 50.97 Apr 1, 2008 51.06 53.13 9,357,600 50.62 Mar 3, 2008 52.43 50.68 12,368,300 48.29 Feb 1, 2008 55.35 52.61 11,151,100 50.13 Jan 2, 2008 50.05 55.42 16,139,800 52.67 Prepared by (Yahoo! Finance) Marketing Strategy Target Corporation’s marketing strategy is multifaceted and varied between contexts. For example, instead of simply creating ads to boost sales, according to one source, “Target’s marketing department creates programs that are substantial money-makers for the company, such as registries” (Rowley 60). That is, Target also seeks to capitalize and return profit on their marketing and advertising campaigns. Another instance of this strategy is the Target Center and Target Field in downtown Minneapolis, which not only increase the company’s name recognition and their involvement in the community, but also their profitability. Target is also known for making use of marketing studies and other quantitative measures, such as traffic analyses, in order to best place their store locations (Rowley 104). Although this is not a form of advertising that tries to pull customers in, it is still a necessary component of marketing because most retail consumers live in the general area, which makes necessary a specific knowledge of the demand within that market space for the sake of profitability. Target Corporation is also famous for so-called “cause marketing”, which refers to the alignment of a company or brand with a cause to generate business and a general social good (Cause Marketing Forum). Target maintains a number of philanthropic interests both in the Minneapolis community and throughout the nation. According to some estimates, Target gives about five percent of its pre-tax operating profit, which translate to about $3 million per week to the communities in which it operates. In addition, through its “Take Charge of Education” initiative, it has given nearly $150 million to date to schools across the United States. This boosts the public relations of Target and encourages customers to become return shoppers. Financial Growth Target plans to grow not only in terms of the creation of new stores, but also in the significant remodeling of existing stores. This includes a $1 billion dollar investment in about 340 their properties. This includes new merchandise initiatives, expanding their presence in the grocery market, and enhanced layout. Target plans to expand its stores by 10 in 2011 by placing them in high-traffic, existing trade areas. These newer locations will meet the requirements of their “smaller store format” in order to fit within dense urban marketplaces with real estate constraints. Part of this effort is expanding into dense international locations in Canada (with concrete plans already set in place), Mexico, and other parts of Latin America within the next 3 to 5 years (BusinessWire). Target’s quarterly revenue growth, as of 2011, is at 2.40%, which is a very healthy rate for a company of Target’s size and industry (Yahoo! Finance). Wal-Mart also has a 2.40% quarterly revenue growth. Given Target’s plans for expansion, their amount of liquid capital, and their existing renovation efforts, the company is likely to maintain this rate of growth through time (BusinessWire). Managerial Objectives This financial growth is part of the managerial objectives of Target’s leadership. Instead of measuring against previous years’ performance, Target measures success against clearly defined goals, which means that goals and objectives are crucial within the company. Moreover, as is necessary in a company experiencing rapid growth, management places a special focus on profit. Target Corporation continues to grow and to expand into new markets where demand for discount retailers is high. In particular, Target has announced that it is expanding internationally into Canada after having purchased the property for approximately 220 Zellers stores. These sites will continue to operate under the Zellers brand until Target decides to switch these locations to their own branding. By 2013, the goal for Target is to have 150 stores operating in Canada by 2013 (Target Stores). An explicit management objective of Target’s corporate governance is to strengthen the “communities where it does business” (Target Stores). This idea incorporates both a company culture and a cause marketing strategy that should affect how communities feel about the presence of Target Corporation. Part of the justification for a Canadian expansion, in addition to being an intelligent business move for the company, was that this expansion would positively affect Canadians: creating jobs and generating taxes for the government. Works Cited AP. Woman sues Target over debt collection practices. 21 April 2011. 2 May 2011 . BusinessWire. Target Focused on Strategic Growth. 21 January 2010. 29 April 2011 . Cause Marketing Forum. Background and Basics. n.d. 29 April 2011 . Megerian, Chris. Target Corporation settled a lawsuit with the state of New Jersey for $375,000 after Target was accused of selling expired baby formula and charging prices different than advertised at the check out couner. 10 November 2009. 4 May 2011 . Rosenkrantz, Holly. ‘Stay Union-Free’ Pushed by Target, Michaels as Obama Law Looms . 29 December 2009. 3 May 2011 . Rowley, Laura. On Target: How the World's Hottest Retailer Hit a Bull's-Eye. New York: Wiley, 2004. SEC. Target Corporation. Form 10-K. Washington, D.C.: United States Securities and Exchange Commission, 2011. Serres, Chris. Target vs. Wal-Mart. 22 May 2005. 2 May 2011 . Target Stores. Target Corporation to Acquire Interest in Canadian Real Estate from Zellers Inc., a Subsidiary of Hudson’s Bay Company, for C$1.825 Billion. 13 January 2011. 29 April 2011 . Yahoo! Finance. Target Corporation. 4 May 2011. 4 May 2011 . Read More