This is especially true for Target, a company that is firing on all cylinders at the moment. Let’s discuss a few reasons why Target is the # 1 big box retailer inventory.
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May 20, 2021
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This story originally appeared on MarketBeat
All big box retailers love Target (NYSE: TGT) have several similar qualities that distinguish them from traditional stores. For example, they typically have large physical locations, are part of a chain store, and offer a wide variety of different products and services that consumers can purchase. This business model was very profitable during the pandemic, as many of these stores were considered essential businesses and benefited from panic buying.
Today, big box retailers find themselves at an interesting crossroads. Some investors believe that these types of companies have reached their Peak in sales last year thanks to all the stimulus payments and the procurement of consumer goods to deal with the pandemic. This view is certainly justified, but there are still many reasons to be optimistic about big box retailers in the future. This is especially true for Target, a company that is firing on all cylinders at the moment.
Let’s discuss a few reasons why Target is the # 1 big box retailer inventory.
Smart strategic moves
Target is a great company to look at as a long-term owner thanks to the smart strategic moves the management of the business continues to make. First of all, you have to like the company’s big investments in e-commerce which are already very profitable. Target saw its digital sales increase by roughly $ 10 billion in 2020, thanks to a 235% growth in the company’s same-day services. Note that Target acquired Shipt in 2017, an online same-day delivery service that allows Target to process orders for groceries, essentials and more at lightning speed. While it is true that last year more people preferred to order from home, don’t underestimate the sustainability of Target’s digital sales channel as consumer preferences are constantly shifting to online shopping.
Then, like many big box retailers, Target developed a loyalty program designed to keep customers coming back. The program, called Target Circle, allows customers to earn 1% cashback when buying from Target and has hundreds of different offers. This is another smart strategic move, as it will provide insight into customer data that can help the business improve inventory and create better marketing. Finally, the fact that Target matches the prices of many Walmart items and offers big discounts on differentiated products is another smart way to keep customers loyal to the company’s brand.
Another sign that Target is the best big box retail inventory to own is the fact that the company continues to generate extraordinary profits. In the first quarter, comparable sales increased 22.9% year over year and revenue increased 23.4% year over year to $ 24.2 billion. Target also reported first quarter GAAP EPS of $ 4.17, an astonishing 643.2% year-over-year increase. These are fantastic operating results that confirm that Target continues its positive momentum from last year through 2021.
When you look at the best stocks from big box retailers, names like Target and Walmart are usually at the top of the list. While these are solid companies, one key figure from Target’s first quarter results really stands out. The company said it increased its market share by $ 1 billion in the first quarter, which is a truly impressive achievement given the competitiveness in the retail industry. Target also saw its first-quarter same-store sales increase by 18%, while Walmart saw a less than 3% increase in its same-store sales in the first quarter. The bottom line here is that Target is probably taking customers from Walmart right now and growing at a faster rate, which is another reason this is the first big box retail stock to own.
Dividend aristocrat status
If you’re still not convinced that Target is a great company to add in the long run, consider the company being a dividend aristocrat. This means that Target has increased its dividend payment each year for at least 25 consecutive years. There’s a reason there are so few Dividend Aristocratic stocks to choose from, and the company’s continued commitment to rewarding shareholders is a testament to Target’s operational efficiency and strong balance sheet.
The stocks of dividend-paying aristocrats are attractive for several reasons. They offer a high probability of increasing dividend payouts over the years, which is perfect for investors interested in compound growth. They are also generally stable companies that do not expose investors to as much downside risk as other areas of the market. The target stock is currently offering a dividend yield of 1.32% at this time and a 5-year dividend growth rate (CAGR) of 3.96%. Consider adding stocks if there is a downside after the market has had time to digest the latest earnings release.
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