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Target Corporation ( TGT - Analyst Report ) recently announced that in addition to its low prices, its Canadian stores will offer an extra 5% savings to shoppers through its REDcard products, including Target Debit Card and Target RBC MasterCard.
The move reflects the company's strategic initiative to drive traffic by bringing in innovative ways to attract shoppers. Target partnered with the Royal Bank of Canada to issue the no-annual fee Target RBC MasterCard, which includes the 5% REDcard Rewards program.
In U.S., Target's 5% REDcard Rewards program facilitates it to sustain sales momentum, continue to drive traffic and enhance customers' shopping experience. The company, in order to entice customers, is also providing an additional benefit of free shipping for any e-shopping to its cardholders, who are already getting 5% off for the purchases they made.
During the recently concluded quarter, Target's credit card penetration increased 110 basis points to 7.7%, whereas debit card penetration expanded 300 basis points to 5.1%. Total store REDcard penetration climbed to 12.8% from 8.7% in the year-ago quarter.
The company stated that it remains on course to open 125 stores in Canada by 2013. We believe the opening of stores outside the United States will boost the company's top and bottom lines and improve its efficiency in generating a steady cash flow.
The company aims to exceed $100 billion in sales and would result in earnings per share growth at a CAGR of approximately 10% to 12% per year, resulting in annual earnings of over $8.00 per share or more by 2017. The company also expects to achieve 3% annual growth in comparable-store sales on an average.
Currently, we have a long-term 'Neutral' rating on the stock. Moreover, the company, which competes with Costco Wholesale Corporation ( COST - Analyst Report ) , holds a Zacks #3 Rank, which translates into a short-term Hold recommendation.
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