[ISN] TJX Succeeds Where Target Struggles

http://www.fool.com/investing/general/2014/05/13/tjx-succeeds-where-target-struggles.aspx By Eric Novinson Fool.com May 13, 2014 Shares of Target (NYSE: TGT ) fell by about 3% on Monday May 5, 2014 after the big-box retailer announced that Greg Steinhafel would no longer head up the company as its CEO. This move marked the second high-profile departure related to the data breach at the retailer, as CIO Beth Jacob left the company back in March. However, the data breach just added to the problems that Steinhafel faced at Target. A problematic expansion push into Canada and competition from other retailers have also hit Target’s results. As a result of this, Target posted mixed results for the fourth quarter while its competitor TJX (NYSE: TJX ) posted much stronger results for the period. Target’s recent results Target ended 2013 on a weak note, both domestically and in Canada. In its last earnings report, Target announced that its fourth-quarter sales fell 3.8%, although full-year sales still showed a small rise of 0.9%. Target’s gross margin for the quarter in its domestic operations also narrowed from 27.8% to 27.6% year-over-year, although the full-year gross margin actually showed a minor gain rising from 29.7% to 29.8%. With the heavy price promotions going on at many retailers during the 2013 holiday season, this actually looks impressive as Target did not take a huge hit to its margins for the period. These figures show that even though the last quarter of 2013 didn’t go too well for Target, it wasn’t a total catastrophe as the retailer still managed to show small gains on two important metrics for the year. Target’s diluted earnings per share fell more sharply for the year from $4.52 to $3.07, although most of this stemmed from the $1.13 per share impact of Target’s Canada push. However, the retailer still retains some powerful competitive advantages. The case for Target Target sells competitively priced but attractive clothing, appliances, household decorations, food, and many other things. While it doesn’t always have the inventory selection of a category killer, it usually has an inexpensive item available to satisfy most needs. The company can use price competition to beat higher-end retailers, and its design and fashion appeal can help it beat deep discounters. In addition, the company has also expanded its food lineup by adding fresh groceries. Wal-Mart and the dollar stores also see fresh groceries as a promising growth area. Target also has international expansion potential, even if its Canadian launch didn’t work out as well as it expected. Also, Target isn’t the only discounter that’s lost data to a hack. […]




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