Target (TGT - Free Report) announced Thursday that it is set to hire 20% more seasonal workers during the upcoming holiday shopping period, with a sizeable amount dedicated to online order fulfillment. Target, along with Walmart (WMT - Free Report) and other retail powers are coming off a strong second quarter. Now, TGT stock looks like it might be worth buying ahead of what could be a big holiday shopping season.
Target said that it plans to hire 120,000 seasonal workers for its vital holiday shopping season, which would mark a 20% jump from last year’s 100,000. The Minneapolis-based retailer expects to double the number of holiday employees that work on online order fulfillment.
The firm noted that it needs to add workers as it continues to expand its “Order Pickup” and “Drive Up” services, with an increased focus on “ship-from-store capabilities.” Target said that it plans to almost double the number of holiday hires to help fulfill digital orders, along with 7,500 seasonal employees expected to be added to fulfillment and distribution centers.
Target’s plan follows Macy's (M - Free Report) Wednesday announcement that it hopes to bring in 80,000 seasonal workers, which falls in line with its 2017 goal. Fellow department store Kohl’s (KSS - Free Report) launched its holiday hiring "earlier than ever before" in July.
There are not that many solid estimates out there yet on 2018 holiday shopping numbers, but last year the National Retail Federation said that retail sales during November and December jumped 5.5% to $691.9 billion. Meanwhile, online and “other non-store” sales jumped 11.5% to $138.4 billion.
Now that we have taken a quick look at some of Target’s holiday plans, let’s see why TGT stock might be worth buying as Target looks poised for solid growth.
Target saw its comparable sales surge 6.5% last quarter, which marked the firm’s its strongest quarterly performance since 2005 in this hugely important retail category. Plus, Target’s digital comps soared 41%—on top of 32% growth in the year-ago period—and traffic expanded by 6.4%. Target’s performance, along with other retailers, including Costco (COST - Free Report) and Walmart helped to show that traditional retail can adapt and thrive in the age of Amazon (AMZN - Free Report) .
Over the last year or so Target has redesigned stores, opened smaller locations in urban areas and college towns, while also improving its pricing strategy. The firm also revamped its digital strategy and supply chain. Plus, Target has introduced same-day delivery at over 700 locations—made possible by its acquisition of grocery delivery startup Shipt—and rolled out online ordering and curbside pickup at hundreds of stores.
Price Movement and Valuation
Shares of Target are up only 38% in the last five years, which lags the S&P 500’s 75% climb and its industry’s 120% surge. However, over the last 12 months, TGT stock has soared nearly 50%, which tops its industry’s 35% and crushes the S&P’s 16%. Investors should also note that shares of Target have jumped over 14% in the last three months and currently sit just below their 52-week high of $90.39 per share.
Moving on, Target stock is currently trading at 16X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 28.4X average and the S&P’s 17.4X. TGT has traded as low as 12.3X over the last year with a one-year median of 14.2X. But Target stock is currently trading below its 52-week high of 17X. Plus, we can see that TGT’s valuation picture is hardly stretched compared to where it has traded at over the last five years.
Looking ahead, Target expects to see comparable-store sales growth in line with the first half’s 4.8% for both Q3 and the second half of the year. Our current Zacks Consensus Estimate is calling for Target's full-year revenues to climb by 4.5% to reach $75.13 billion. On the bottom line, Target’s adjusted third-quarter earnings are projected to jump by 20.9% to $1.10 per share, while fiscal 2018 earnings are expected to climb by 14%.
Target has also experienced a ton of upward earnings estimate revision activity for fiscal 2018 and 2019 recently, which helps it earn a Zacks Rank #2 (Buy). Target also sports “A” grades for Value and Growth in our Style Scores system and looks like it might be worth buying at the moment before the holiday shopping season starts.
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