Target Corporation Financial Analysis

The purpose of this memo is to provide Target Corp. senior management with an evaluation of the company’s weighted average cost of capital (WACC). Since the 2010 financial information is not yet to be finalized, the analysis will use the most currently published financial data to evaluate each component of the WACC, including the company financial structure, cost of debt, and cost of equity.

Target Corporation was founded in 1902 and headquartered in Minneapolis, Minnesota. Target Corporation operates general merchandise and food discount stores throughout the United States. The company’s products range from household essentials, to electronics, to toys, to apparel and accessories, to home furnishings, to food and pet supplies. Most of the merchandise is sold under Target and SuperTarget trademarks, but it also sells under private-label brands, such as Archer Farms, Circo, Merona, and Room Essentials. The company also offers merchandise through programs like ClearRx, Great Save, and Home Design Event. Additionally, Target markets its merchandise under license and designer

Target is an upscale discounter that provides high-quality, trendy merchandise at attractive prices in clean, spacious and guest-friendly stores. In addition, Target operates an online business, Target.com. It all started in 1902, when George Dayton joined in partnership with Goodfellow’s Dry Goods Company, the fourth biggest department store that is located in Minneapolis, MN. Dayton, wanting to be more involved in the company bought out Goodfellow’s to become sole owner and President of Dayton Dry Goods Company (Target Corporation, 2014). Travel on down through the years as Daytons continues to grow, until 1962. That was the year an icon was born, its name is “Target.”

Target Corporation is known worldwide as a large retail chain that brings in millions of dollars each fiscal year. The ability to remain competitive in a saturated industry could prove difficult to some retailers, but Target remains one of the leaders in the retail market. With success comes risk. Target Corporation competes against online retailers as well as “big box” stores to remain competitive.

Some of these numbers in comparison to other general merchandise retailers like Walmart, make Target look like a little fish in a big pond. Walmart’s revenues exceed 469 million, with a gross profit margin of 24.4% (Walmart, 2014). The massive amount of revenues extends from Walmart’s functioning in over 27 countries, compared to Target’s operations in the United States and Canada (Walmart, 2014). Also, Walmart has an operating income of $27.8 million, representing 5.9% of net sales is also below industry average of 6.62% (Morning Star, 2014). Which means that bigger numbers, do not necessarily means better financial health.

Given the analysis of the financials and goals of Target and Best Buy, I agree that Target is a far superior company. I would also be more likely to invest in them as a “sure thing.” However, there is the possibility of Best Buy making a comeback, which means that their stock is undervalued and could be purchased extremely cheaply and sold for a much high price at a later

Ultimately being reflected in its more than $72 billion in annual sales although is one-seventh of Wal-Mart’s size, Target’s number one rival.

Target Corporation is having a very stable financial policy and dividend policy. From the historical financial data, Target had debt $11,044M, $11,202M, $10,599M, $17,471M, and $19,882M in the year of 2005,2006,2007,2008, and 2009 respectively. The long-term debt/equity ratio rises from 69.34% to 108%.

Unfortunately for Target, they have had some bad press about the many stockouts that have had occurred in their stores (Marshall, Solomon, Stuart, 2012). This has taken an obvious toll on sales and customers are frustrated (Marshall, Solomon, Stuart, 2012). Target has worked to stock their stores with a vast variety of choices and it seems as though this has not worked in their favor.

The Target Corporation, what used to be known as the Dayton Dry Goods Co., is an American retailing company that was founded in Minneapolis, Minnesota, in 1902. In 1962, the first Target store was opened in Roseville, Minnesota. It is the fifth largest retailer by sales revenue in the United States behind Wal-Mart, The Home Depot, Kroger and Costco. The company is ranked 33rd on the 2007 Fortune 500. Target operates its retailing business exclusively in the United States. It is a rival with Kmart and Wal-Mart. Target was listed in Internet Retailer's list of the top 500 retail web sites in 2007 also, this not only proves of brick and mortar sucsess but also online retail.

Based on the company’s 2013 annual report, Target’s fourth quarter reported net earnings of $520 million dollars and revenues of $21.5 billion dollars. Compared to the same period in the previous year, net earnings and total revenues decreased by 46% and 3.8%, respectively. With regards to the second and third quarter of 2013, the fourth quarter is the only quarter which reports a decline in revenue when compared to the same periods in 2012. 2013’s second and third quarter revenues all show an increase in total revenue year-over-year. The only exception is in its 2013 first quarter, which failed to break the prior year’s first quarter earnings of $16.9 billion. The reason for this is due to weak sales in seasonal and

The debt carries an obligation of payment to creditors while equity provides an opportunity for profits for shareholders. Therefore, all revenues from Target and Walmart operation must go to pay creditors first; shareholders retain whatever remains after accounting for all expenses, including the cost of operations, taxes, etc. Since shareholders face more risk than creditors, shareholders generally expect a return on their capital that is higher than the returns that creditors expect on their capital. However, Walmart and Target cost of capital is thus a mixture of returns to creditors and returns to equity provider (Trainer, 2017).

Company Profile Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota. Target Corporation operates general merchandise and food discount stores in the United States. It operates as two reportable segments: Retail and Credit Card. The company offers household essentials, including electronics, music, and toys; apparel and accessories; home furnishings as well as seasonal merchandise. It also sells its merchandise under private-label brands, such as Archer Farms, etc. Target Corporation operates in-store amenities, such as Target Caféand Target Clinic as well. Its marketing strategy includes selling its products on its online shopping site Target.com and its network of

The Target Corporation is a general merchandise retailer that opened up in in 1962 under the parent company of Dayton Corporation. This parent company was renamed the Target Corporation in 2000 and are based out of Minneapolis. There are over 1,800 Target stores throughout the United States which includes Targets and Super Targets. In 2005 Target began expansion in India and in 2011 to Canada however this expansion into Canada did not fare well and all Target Canada stores were closed by 2015. According to Forbes in 2005 they we ranked amongst the highest cash-giving companies in America with 2.1% given and they donate about 5% of its pre-tax operating profit. In 2010 Target was ranked number 22 by Fortune magazine’s World's Most Admired Companies.

Did you know the Target brand, the red bull’s eye logo are recognized by more than 97% of the United States population (Target Facts sheet, 2007; Community Grand Forks, 2007).Target Corporation or Target specializes in the retail business. Today, Target remains committed to providing a one-stop shopping experience for guests by delivering differentiated merchandise and outstanding value with its Expect More. Pay Less® brand promise. (Pressroom.Target.com 2015) It is an American company and has its headquarters in Minneapolis, Minnesota. Target currently is the second largest general merchandise retailer in America (behind Wal-Mart). The fashion-forward discounter operates some 1,795 Target and SuperTarget stores across North America, as well as an online business at Target.com. (Hoover 2015). Target Corporation operates general merchandise discount stores in the United States. The Company 's merchandising operations include general merchandise and food discount stores and a fully integrated online business. Target also offers credit to qualified applicants through its branded proprietary credit cards (Bloomberg 2015). The company is growing its grocery business and aggressively expanding stores. Target Corporation shows quantifiable benefit towards the company, achieves competitive advantage through information systems, and fulfills Porters five forces.