Target's REDcards program has showed solid growth, especially the Target Visa. Even though the economy in general has faced rising delinquincy rates due to the subprime lending crisis, Target's default rate has been low, contributing to Target's strong credit profile. The REDcard program additionally provides a unique incentive to shop at Target stores, which helps create customer loyalty to the Target name.
Wall Street analysts estimate that TGT's earnings per share growth will be up 17.9%, 13.1% next year, and continue annually at a rate of 12.9% for the next five years. Based on five year projections of double digit earnings increases, brokerages have published 19 buy and 5 hold recommendations for their customers and JCP has a 100% Barchart technical buy signal.
Though Target competes with its competitors on a price level, it also differentiates itself by having many exclusive houseware and clothing brands. These brands allow Target to be competitive with its competitors even if it is charging higher prices and allows Target to retain its customers better as well.
The intensity of Target's competition with Wal-Mart Stores (WMT) may be overstated. Although the two retailers do share a large proportion of customers, Target has found a strong niche supplying the needs of the "selective" consumers who demand designer goods at discount prices. This gives Target a strong position from which to grow.
Target has focused on expanding its internal distribution and production services, as well as its private-label brand names, in order to cut costs. This translates into increased profitability for the company, with the potential for future growth.
Target currently plans to spin off its real estate holdings into a separate entity, which would then lease the land to Target. This would allow the company to focus more of its energy on improving its retail business and isolate it from the flagging real estate market.