Target’s stock has fallen 45% over five years while Walmart is up 131% and Costco is up 180%. In the most recent quarter, Target revenue rose 6.7% to $25.4 billion, but net earnings fell 24% to $781 million. The main issue is scale: Target is far smaller than Walmart and Costco by revenue. Target has more store locations than Costco, but Costco’s model generates large membership-fee income that strongly supports operating results. Walmart benefits from dense store coverage and a large e-commerce business. Target also faces a weaker public image, ranking 71st in reputation, which makes it harder to attract shoppers.
"Over the period, Target's stock has been down 45%. Walmart's ( NYSE: WMT) is 131% higher. Costco is up 180%. Investors abandoned the chance of a recovery long ago, and Target's results show why"
"In the most recent quarter, Target largely outperformed expectations. Revenue rose 6.7% to $25.4 billion. But net earnings were a less-than-modest $781 million, down 24% from the year-ago period. Earnings were not the sole measurement of Target's problem. The worst problem is scale."
"Costco's revenue in the most recent quarter was $68.2 billion. Walmart's comparable figure for its US operations was $117 billion. But by these standards, Target is very small. Target bests Costco in locations. Costco has 634 in the US and Puerto Rico. Target has 2,000. Walmart has 4,600. The edge Costco has, however, is the genius of its model."
"It charges people to shop in its stores. Its quarterly membership fees are slightly more than $1.3 billion, almost all of which goes to the bottom line. They are about 65% of Costco's operating income. No other large retailer has been able to match the powerful financial structure."
#retail-competition #stock-performance #business-model-scale #membership-fees #reputation-and-consumer-perception
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