Can Target Catch Up With Walmart In the US?

September 11th, 2019 by Trefis Team
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Target (NYSE: TGT) offers their customers, referred to as “guests,” everyday essentials and fashionable, differentiated merchandise at discounted prices. They deliver a preferred shopping experience to their guests, supported by supply chain and technology, devotion to innovation, loyalty offerings, and a suite of fulfillment options. Geographically, Target is very US specific and nearly all its revenues are generated within the U.S and the vast majority of its property and equipment is located within the U.S.

Target’s competition is primarily from other retail chains, wholesale clubs, category specific retailers, drug stores, and supermarkets. In this analysis we see how Target’s Key Operating Metrics compare against one of its biggest competitors, i.e. Walmart-US. For detailed analysis see our interactive dashboard – How Does Target’s Key Operating Metrics Compare With Walmart (US)? In addition, here is more Multiline Retail data.

Note: For the purpose of this analysis Walmart’s Financial Year’s notation is brought in line with Target’s.

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How does Target’s Revenue compare with Walmart-US?

  • Target’s revenue has seen a steady and positive growth over the past couple of years as it rose from $70.3 billion in 2016 to $75.4 billion in 2018. Trefis estimates Revenue to increase by around 4.6% to $78.8 billion in 2019.
  • Walmart-US also has seen a steady and positive growth over the past couple of years as it rose from $307.8 billion in 2016 to $331.7  billion in 2018. Trefis estimates Revenue to go up by around 3.7% to $344 billion in 2019.

 

Target & Walmart-US’s Revenue can be divided into 3 Key Metrics:

Metric 1: Number of Stores:

  • Target has seen small but positive growth with regards to its number of stores as it increased to around 1,833 in 2018 from 1,797 in 2016. Trefis estimates the trend to continue and stores to be around 1,851 in 2019.
  • Similarly, Walmart-US’s also has seen small but positive growth with regards to its number of stores as it increased to around 4,765 in 2018 from 4,623 in 2016. Trefis estimates the trend to continue and stores to be around 4,789 in 2019.

Metric 2: Square footage per store

  • The square footage per store has fallen slightly for Target from 133.3K in 2016 to 130.6K in 2018. Trefis estimates the metric to recover slightly to around 131.3K in 2019.
  • Similarly, Walmart-US’s has also seen a slight fall in the metric from 149.7K in 2016 to 147.7K in 2018. Trefis estimates the trend to continue and the metric to be around 147.6K in 2019.
 Metric 3: Revenue Per Square Foot

  • Target’s revenue per square foot metric has grown at a good pace from $293.4 in 2016 to $314.7 in 2018. Trefis estimates the trend to continue and the metric to be around $324.1 in 2019.
  • Similarly, Walmart-US’s revenue per square foot metric has grown at a good pace from $444.9 in 2016 to $471.2 in 2018. Trefis estimates the trend to continue and the metric to be around $486.7 in 2019.

 

 Comparing Target’s Gross Margin with Walmart-US:

  • Target’s Gross Margin has been falling slightly over the last few years as it fell from 30.5% in 2016 to 29.3% in 2018. Trefis estimates the margin to remain nearly flat at 29.3% in 2019.
  • Walmart-US’s Gross Margin has also been falling slightly over the last few years as it fell from 27.5% in 2016 to 26.8% in 2018. Trefis estimates the margin to recover a bit to 26.9% in 2019.

Conclusion:

  • Compared to Walmart-US, Target is a smaller player in terms of coverage and revenue. Walmart-US outperforms Target in nearly all revenue related metrics but Target has a better edge over Walmart-US in Gross Margin where it is better by around 250 basis points.
  • In conclusion, Walmart-US is a bigger fish than Target, but Target is on a good track with a positive revenue growth. The revenue growth and a positive outlook has made us increase our valuation of Target to $113 per share.

 

 

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