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Case Study - Target Corporation
Cesar A. Marrero
MGMT565 - Financial Analysis and Management I
12 January 2014
Dr. Darrin DeReus
Southwestern College Professional Studies
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Abstract
This paper is a case study of Target Corporation, discussing the financial goal of the corporation,
the financial results of the last 3 years, and the investment trade-off (if any). It will also discuss
the financial philosophy of the company, and if the financial managers look after the interest of
their shareholders.
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Introduction
The Target Corporation is an American retailing company, founded in 1902 by George
Draper Dayton and headquartered in Minneapolis, Minnesota. Fortune Magazine ranked Target
22 amongst the most admired companies, five spots above its nearest retail competitor, Walmart
(Fortune, 2013). The company is currently ranked 38th (down from 33rd) on the Fortune 500
(Money.com, 2014) and is a component of the Standard & Poor's 500 index, which includes 500
leading companies and captures approximately 80% coverage of available market capitalization.
As of this writing, their stock quote on the New York Stock Exchange is $62.62, down 0.72
points, probably from the recent data breach of customer's credit card information during the
holiday season (Target.com, 2014).
Case Study - Company Financial Data
Target currently works in three distinct reportable segments: U.S. Retail, U.S. Credit
Card and Canadian. Their investment policy is designed to preserve principal and liquidity of
their short-term investments, which allows them to investment in large money market funds or
highly rated direct short-term instruments that mature in 60 days or less. They also place certain
dollar limits on their investments in individual funds or instruments (Target, pg. 39, 2012).
According to Target's Long-Range Plan, the financial goal of the corporation is to reach
at least $100 billion in sales and $8 in earnings per share in 2017. So far, they were able to reach
$72.0 billion in retail sales, and their current earnings per share is around $4.76 per share - up
7.9% from last year (Target, pg. 30, 2012). Target's Annual Report for 2012 indicates that they
had an annual growth of 4.9% in total revenues, and their net earnings grew 2.4%. For fiscal
year 2013 they are expecting more growth into new markets with their Canadian Retail Segment:
they have plans to undertake the largest, single-year store expansion in their history, where they
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will open Target stores in Canada and are on track to open 124 stores across all 10 provinces
(Target, pg. 3, 2012). The following chart illustrates the company's financial highlights during
the last five fiscal years:
Table 1 - Target's Financial Highlights for Fiscal Years 2008-2012
Target's financial managers are evidently keen to uphold stakeholder's monetary interests.
They take stakeholders viewpoints into consideration when making business decisions, enabling
change where it aligns with business priorities and corporate responsibility focus areas, and they
regularly engage a third party to complete confidential interviews with key stakeholders to gather
specific feedback around Target’s overall reputation and efforts. They perform periodic analyst
calls and direct engagement through individual meetings, ongoing dialogue with stakeholders,
and by hosting Annual Investor Day and Shareholders’ Meetings (Target, pg. 7, 2012).
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To get an idea of their investment trade-off, last year Target invested $3.3 billion of
capital towards their U.S. and Canadian businesses, while returning over $2.7 billion to
shareholders through share repurchase and dividend payments (Target, pg. 3, 2012). In addition,
during the first quarter of 2012, they completed a $10 billion share repurchase program
(authorized by the Board of Directors in November 2007), and began repurchasing shares under
a new $5 billion program (authorized by the Board of Directors in January 2012). During 2012,
they repurchased 32.2 million shares of common stock for a total investment of $1,900 million
($58.96 per share), and during 2011, they repurchased 37.2 million shares of common stock for a
total investment of $1,894 million ($50.89 per share).
Table 2 - Dividends Paid per Share (Fiscal 2010 to present)
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Target paid dividends totaling $869 million in 2012 and $750 million in 2011, for an
increase of 15.9 percent. They declared dividends totaling $903 million ($1.38 per share) in
2012, for an increase of 16.2 percent over 2011. They declared dividends totaling $777 million
($1.15 per share) in 2011, an increase of 17.8 percent over 2010 (Target, pg. 39, 2012).
Conclusion
Target is obviously a very successful company. According to their Annual Report, the
company has paid dividends every quarter since their initial public offering in 1967 (Target, pg.
39, 2012). After cursory observation of the data from the different financial and corporate
reports, it is evident that their financial managers are definitely looking after the interest of their
shareholders … evident by the way they've managed their financials, and by the way their
leadership has helped meet their corporate goals. Gregg Steinhafel, Chairman, President and
CEO of Target has stated that "...Target will apply the same rigorous financial discipline that we
have applied historically, ensuring a returns-based approach and the prudent use of capital."
(Target, 2014).
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References
Brealey, R., Myers, S., Allen, F. (2014). Principles of Corporate Finance (11th ed.). New York:
McGraw-Hill/Irwin
Fortune Magazine (2014). World's Most Admired Companies 2013 - Fortune. Retrieved
January 12, 2014, from http://money.cnn.com/magazines/fortune/most-admired/
Money.com Website (2014). Fortune 500: Target Corp (TGT). Retrieved January 12, 2014, from
http://money.cnn.com/magazines/fortune/fortune500/2012/snapshots/2303.html
Target Corporation. (2012). Corporate Responsibility Report - 2012. Retrieved January 12, 2014,
from official website: https://corporate.target.com/_media/TargetCorp/csr/pdf/2012corporate-responsibility-report.pdf
Target Corporation. (2014). Financial News Release - January 10, 2014. Retrieved January 11,
2014, from official website: http://investors.target.com/phoenix.zhtml?c=65828&p=irolnewsArticle&ID=1889763