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How Does Target’s Historical Sales Growth Compare to Its Peers’?

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Analyzing Target’s historical sales performance

Target (TGT) operates 1,792 stores exclusively in the United States. The company clocked sales of $73.8 billion in fiscal 2016.[1. Fiscal year ended January 30, 2016.]

The retailer opened 15 new stores in the year. Its same-store sales rose 2.1%, with customer traffic at stores up 1.3%. Its same-store sales grew sequentially for the second straight year.

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Comparing historical sales growth rates with peers

Target’s revenue has grown at a compound annual growth rate (or CAGR) of 1.8% over the last five years. In contrast, other discount retailers such as TJX Companies (TJX), Ross Stores (ROST), and Burlington Stores (BURL) have grown their revenues at CAGRs of 7.1%, 8.7%, and 6.7%, respectively, over the comparative period.

Department store retailers Macy’s (M) and Kohl’s (KSS) grew their sales at CAGRs of 1.6% and 0.9%, respectively, over the same period.

Target’s underperformance relative to the performances of some of its peers is partly due to its exit from Canada in 2014 and partly due to the fallout from the company’s data breach in December 2013. The data breach resulted in falling store traffic and falling same-store sales for several quarters.

Also, off-price retailers have been benefiting from cautious consumer spending habits in the aftermath of the Great Recession.

TGT, TJX, and ROST together constitute 2.5% of the portfolio holdings of the First Trust Consumer Discretionary AlphaDEX ETF (FXD).

Merchandising categories

Target’s merchandise assortment is diverse. It encompasses a range of goods, including groceries and pet supplies, household essentials, home furnishings and décor, hardlines, and apparel and accessories. We’ll discuss category performance in greater detail in the next article.

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