# Target Corp. (TGT)



## Addy (Mar 12, 2010)

What are your thoughts on this, seeing as they are moving into Canada?

I was in one of the newer (2012) Canadian Walmarts a few weeks ago, in Hamilton's Centre Mall. Which happens to be steps away from a Zellers being turned into Target (Target signs are already up on the building). This Walmart didn't have an in store bakery or deli. If you wanted quality anything, you were in the WRONG store. The walmart closer to where I live (smaller city) had decent cheese in the deli, meanwhile the one in Hamilton (Centre Mall) had at best Cracker Barrel (gag). There is also a Metro steps away, so between the three there will either be stiff competition, or simply three different target markets.

I've been recently reading up more and more on Target but I really have no idea how profitable it will be once it's in Canada, and if that will reflect in the stock price.

Ash Anderson (Motley Fool) has this to say:

'When it comes to Target, I think they offer the best future growth prospects. The company will likely continue expanding over the next decade and is truly the definition of a long term investment. With their low P/E of 13.75, I think that you could do worse things than initiate a position in this future prospect. Target also pays a dividend that yields 2.3%.'

What are your thoughts?


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## Sherlock (Apr 18, 2010)

I hold it and am optimistic. They intend to expand not just in Canada but throughout the world.


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## SpIcEz (Jan 8, 2013)

I am curious to see the results of their Canadian expansion.

WalMart isnt going to take it quietly, they are putting up defences like its war, and digging trenches like WWI.

Almost every Zeller location being converted to Target has a Walmart close by, and if doesnt a Walmart is being opened up... FASTER than Target.
Heck, Ive seen some of the Zellers that werent bought by Target, being turned into Walmarts.

Honnetly, its going to be interesting for consumers in Canada for the next few years. About investments.... I dont know.


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## Sampson (Apr 3, 2009)

SpIcEz said:


> WalMart isnt going to take it quietly, they are putting up defences like its war, and digging trenches like WWI.


This hasn't slowed Target's rate of growth in the US, where both stores are often in close proximity.

I've been to the stores often and I think Canadians will embrace the stores, however, I think the success of the stores, like the source of their recent revenue growth in the US will all be about groceries. I don't think Canadians have quite gotten to the point where they go to Walmart for groceries, but if you go to the Supercentres, people are starting.

Target should be able to capture this dept. store grocery niche more quickly since the stores do seem 'nicer' and this might have shoppers more prone to buying groceries there.

Aside from groceries, Target should be able to capture some customers in the low, mid-end fashion/clothing market. Go to any mall and we are bombarded by not only the large American clothing retailers, but a host of family owned smaller clothing retailers, Reitmans' comes to mind, where Target can compete directly. Economies of scale will play in their favor and they should squeeze customers from these lesser known and visited stores.

In the end, this initial expansion shouldn't be a make or break. Its only a 10% expansion in total stores they operate, and clearly they are only opening a few per city initially. If they do well in Canada in the short term, there is still plenty of opportunity for growth in this Country.

Even without the Canadian expansion, revenue growth has been good even over the past few years, the stock is fairly valued, so a reasonable investment, even at current prices. Debt levels are a little high, but steady revenue will give them flexibility even if credit gets tight again. I like the top line growth, but bottom line must improve if the stock will go anywhere. Consistent dividend keeps investors interested, so relatively low beta. I own and will continue to hold through the Canadian expansion.


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## Sherlock (Apr 18, 2010)

From what I remember from the few times I shopped at Target in the US, Target is not really the same as Walmart. Target is slightly more expensive and most of their goods, especially clothes, or of higher quality, though it's still cheaper and lower quality that stores like Sears or Kohl's or JC Penny (how come we don't have those 2 in Canada?). I'd say Target is targeting a slightly wealthier demographic than Walmart, although there is a lot of overlap too.


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## Sampson (Apr 3, 2009)

Absolutely targeting a slightly different market than Walmart, but I think the separation between Walmart/Target shoppers in the US is less pronounced in Canada. This will help Target steal customers from existing Canadian retailers that Walmart isn't able to do IMHO.


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## MrMatt (Dec 21, 2011)

Retail sucks. It's a tough competitive market with very few moats. There is little high margin business left.

Costco is winning the low cost game, and I don't see anyone seriously threatening them, but they just don't have the P/E I look for.


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## SpIcEz (Jan 8, 2013)

Sampson,

I understand what you are saying. But I think the markets are different in the US and Canada, and I'm not so sure, there is room for both.

We'll see in the long run.


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## Sampson (Apr 3, 2009)

SpIcEz said:


> But I think the markets are different in the US and Canada


I agree, but I think this plays in Target's favor. As I described, browse through the grocery and clothing sections of Walmart, both for items and for shoppers. I think Target will do better in both these areas. The grocery retail sector is obviously tight, but just like in the US where it took some time, I think it will take off in Canada also.


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