Back to top

Image: Bigstock

Target (TGT) Outpaces Industry in the Past 6 Months: Here's Why

Read MoreHide Full Article

Target Corporation (TGT - Free Report) , one of the widely recognized names in the Retail – Discount Stores industry, has exhibited an outstanding run on the bourses in the past six months. Thanks to its operational initiatives — strengthening of omni-channel solutions, expanding customer reach and focus on brand innovation — the stock has outpaced the industry and the Retail-Wholesale sector. In the said period, shares of Target have surged about 30% compared with the industry’s rally of 15.6%. Meanwhile, the sector declined 0.1%.

Additionally, an uptrend in the Zacks Consensus Estimate echoes the same sentiment. The consensus estimates for the current and next financial year have increased about 0.6% and 0.3% to $8.66 and $9.61, respectively, over the past seven days. Notably, this Zacks Rank #3 (Hold) stock’s long-term earnings growth rate of 10.2% and a Growth Score of A highlight its inherent strength.

Strengthening Position in Industry

Target has been making multiple changes to its business model to adapt and stay relevant in the ever-evolving retail landscape. The company, which is among the biggest winners amid the pandemic, has been deploying resources to enhance omni-channel capacities, including same-day delivery of in-store purchases and fast track technology improvements.

To accelerate industry-leading capabilities, the company plans to make an investment of about $4 billion annually during the next several years to ramp up store openings and remodels, scale up fulfillment services and enhance supply chain capabilities, keeping in mind speed and convenience. We note that the company had invested approximately $2.65 billion in fiscal 2020.

Undeniably, Target has been aggressively adopting strategies to provide seamless shopping experience through miscellaneous channels. We note that same-day services (Order Pick Up, Drive Up and Shipt) soared 212% during the final quarter of fiscal 2020. Sales through Drive-Up, an app-based service, were up more than 500% during the quarter. Also, the company has unveiled plans to increase the total fresh, refrigerated and frozen food items to Drive Up and Order Pickup nationwide as well as add adult beverage pickup to 800 more stores.

It also intends to ramp up store opening drive with plans to add 30-40 new outlets annually. Additionally, it plans to remodel roughly 150 stores in fiscal 2021, and more than 200 stores a year thereafter. Target also plans to open five sortation centers in fiscal 2021 to provide speed deliveries to customers making online purchases. Moreover, the company expects to open two distribution centers, one in Delaware and one in Chicago in fiscal 2021 with plans to open two more in fiscal 2022 to support the east and west coastal areas.

Thanks to its one-stop shopping destination, customers opted Target amid the pandemic for its multi-category assortment of owned and exclusive brands as well as popular national brands. The company concluded fiscal 2020 with 10 owned brands generating annual sales of $1 billion or more, each. Of these, four brands crossed the $2 billion mark. Impressively, Target is always striving to build on its partnerships, especially with popular and high-profile brands like Apple, Ulta Beauty and Levi's.

Stocks to Consider

L Brands (LB - Free Report) has a long-term earnings growth rate of 13%. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18%. It presently sports a Zacks Rank #1.

Buckle, Inc. (BKE - Free Report) witnessed a positive earnings surprise of 5.6% in the last reported quarter. The stock carries a Zacks Rank #1.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>