Target Corporation: Poised For A Pop

| About: Target Corporation (TGT)

I believe that the Target Corporation (NYSE:TGT) offers the compelling potential to become a quality long-term winning position poised for significant growth over the next few years as it begins to benefit from its expansion internationally and also through the continued growth of its popular website Target.com.

I am increasingly becoming more bullish on the Target Corporation especially after its excessive 5% drop since only Tuesday. What is surprising to me is the fact that even Wal-Mart (NYSE:WMT) has outperformed Target in the recent pullback even with the breadth and depth of the unfolding scandal still to come.

Target is a Minneapolis-based Corporation that has 1,764 stores across the United States. It plans to open its first international store, in Canada, in 2013. They market merchandise at discounted prices without required membership for purchase, like Costco (NASDAQ:COST) or Sam's Club.

Target operates mainly in three distinct segments: U.S. Retail, U.S. Credit Card and Canadian. As a component of the U.S. Retail Segment, its online presence is designed to enable guests to purchase products either online or by locating them in one of its stores with the aid of online research and location tools.

Its U.S. Credit Card Segment offers credit to guests through its branded credit cards, the Target Visa and the Target Card. Additionally, it offer a branded Target Debit Card.

Its Canadian Segment was reported during the year ended January 28, 2012, as a result of its purchase of leasehold interests in Canada from Zellers, Inc. The Company has 189 Zellers sites. It operated 37 distribution centers at January 28, 2012.

Target reported First-Quarter results for 2012 Friday. The strong growth story continues with comparable-store sales increasing 5.4% compared with First-Quarter 2011. This equated to Target's strongest quarterly performance in more than six years.

It does seem to have impressively found the ability to successfully brand itself to the higher-end consumer wary of the hassles of a Wal-Mart or Costco experience sometimes entails. Both Wal-Mart and Costco have come under criticism for alienating this lucrative group. Consumers are responding to its unique new trend of increasingly fashionable merchandise at discount prices.

Investors can immediately benefit from its distinguished record of a stable and increasing dividend payout in the meantime. It currently yields 2.16% with a payout ratio of about 50%.

On the growth side, Target has roughly the same volatility as the broader market while its peers are substantially less volatile. This allows for possibly higher risk-adjusted returns as the economy eventually moves towards full employment.

Closing

Target has been able to keep a relatively small store feel while not minimizing its ability to still provide great products at discount prices. It has been successful in its strategy to appeal to the more neglected high-end or upper middle class consumer.

Disclosure: I am long WMT, TGT.

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