What’s in store for Target (NYSE:TGT)?


Target (NYSE:TGT)’s revenue in terms of store productivity fell from $296 in 2007 to $280 in 2008, as a result of the economic chaos in the United States. But 2009 saw economic recovery, and the figures once again started improving and soon it was $303 in 2012. But in 2013, it fell again to $298. This time it was a shift in interest, as many buyers opted for long lasting products due to low mortgage rates. The figure is expected to rise in the long run as Target (NYSE:TGT) is set its strategy accordingly, offering more online growth, reward programs as well as expansion of small stores that sell products high in demand, hence making more revenue with in the limited premises.

According to predictions, due to growth in the GDP and inflation figures, the revenue per square meter is expected to rise, and Target (NYSE:TGT)’s revenue expectation is of 3% in the next six to seven years. Its further estimated that Target (NYSE:TGT)’s price will be $67, with less than 10% premium to the current market price.

Five years ago, the recession period affected the economy dramatically. Even though, pre-recession times are still far off, gradual yet steady improvement in the economy has boosted consumer confidence. Also, a fall in unemployment will effect spending. Inflation is another important aspect that triggers growth for same sales and also ensures growth in revenue per square meter. Analyzing the nominal GDP growth rate, a 2% increase in retail revenue is expected due to economic growth, and another 1% due to company’s efforts to improve store productivity.

Online sales are also expected to help Target (NYSE:TGT) with its revenue per square feet growth. Lately, online sales have been growing at a rapid pace, and will eventually become a driving force. Last couple of years have revealed that customers prefer online shopping. This has been an ongoing pattern and Target (NYSE:TGT) along with other retailers are doing everything to create a web presence. Store traffic seems to decline every year by 5% and there is a 15% increase in online sales.

As mentioned above, Target (NYSE:TGT) has also expanded their presence into many US urban markets. They have opened stores that are 40% smaller than existing stores, and have merchandise especially designed for the urban dwellers.

Another aspect that Target (NYSE:TGT) needs to shift focus on is its original affordable stylish merchandise. Target (NYSE:TGT) has tried its hand in selling groceries. This effected its sales to fall. Hence, it will be fruitful for Target (NYSE:TGT) to shift focus back to its core product line in order to win customers back.

Analysts have predicted Target (NYSE:TGT)’s revenue per square to be $298 in 2013, and $365 within the next six seven years. A 10% downside is expected if the economic recovery slows down or due to continuous fall in store traffic.  But on the other hand if the expansion plan for small stores is successful, online sales boost and customers are satisfied then a 10% rise is also expected.