Target Looks to Smaller Formats, Canadian Expansion and Designer Labels to Boost Sales

TGT: Target logo

In an effort to fight the volatile economic conditions and boost sales, Target (NYSE:TGT) has been pursuing various initiatives. The ongoing euro crisis and the high unemployment rate in the U.S. have added to the economic instability. Target has a wide presence in the U.S. and risks self-cannibalization if it decides to continue expanding at the current rate, and hence it’s critical that the company focuses on diversifying its revenues. For retailers like Wal-Mart (NYSE:WMT), the international segment has been a key revenue contributor and Target has been trying to follow suit by working on international expansion. Apart from Wal-Mart, Target also competes with Best Buy (NYSE:BBY), Macy’s (NYSE:M), Sears (NASDAQ:SHLD), and Costco (NASDAQ:COST).

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Recent Initiatives

Below are some of the key initiatives that Target has been pursuing lately, and we believe the success of these initiatives is critical for the company’s future.

  • Target plans to launch “City Target,” smaller format stores targeted toward urban customers.
  • As part of its international expansion agenda, Target has been actively working on opening stores in Canada and plans to launch in early 2013. We have incorporated the Canadian operations into our forecast, and we estimate these operations to contribute around 7% to the stock value. The company has also indicated plans on expanding into Mexico and Latin America. (See our previous post: Target Doubles Budget for its Canada Expansion)
  • Target is also dabbling with a new business plan. It recently announced plans of partnering with Jason Wu, a women’s wear and accessories designer, to create a limited edition collection of women’s apparel, handbags and scarves. The collection is expected to be available in-store and online by early 2012.