Despite posting an increase in stock prices of 3.68%, Target Corporation has lowered its earnings forecast for the next quarter. There has been a bearish overview of the company’s Earnings per Share (EPS) estimates for the last 12 months leading to regular downward revisions. The low growth outlook requires a number of initiatives to increase growth and assuage potential risks.
After the security breach of 2013, there was a slump in sales and Target Corporation spent $148 Million on breach-related costs. Target Corporation will continue to invest in data security and enhance its surveillance systems to detect and thwart cyber-attacks. Data security is especially important considering that there has been a similar breach at K-Mart, one of its main competitors in October this year, and the FBI has warned that such attacks will increase.
Target Corporation will diversify its target market through expansion and acquisitions. China offers a potential market with millions of customers; Target will open stores in China as well as in Vermont. Acquisitions in the retail market segment are common, and Target will acquire competitors as part of its expansion strategy. The launch of stores in Canada did not go well as planned with most performing poorly and dragging the growth of the parent company. Going forward operations will be scaled down by closing some of the stores.
Target will lower its markup margin to increase its competitiveness and sales volume. The warehouse club model will be adopted within existing stores to increase customer loyalty. The warehouse club model has proved to be very successful with Costco Wholesale Corporation, which has outperformed all retailers in US (Lutz, 2014). Stores in wealthier states that are least affected by economic downturns will be opened, and signature brands will be leveraged to increase sales.
Lutz, A. (2014). Costco's Simple Strategy For Outperforming Wal-Mart And Target. Business Insider. Retrieved 9 November 2014, from http://www.businessinsider.com/costcos-simple-strategy-2014-9