Can Target Surpass Walmart? Essay

2707 words - 11 pages

TARGET STORES, the crown jewel of the Target Corporation, would appear to have everything: zippy ads, fast-growing sales and exclusive merchandise that people rave about. But inside the headquarters tower here, where Target's decisions are made, no one is about to relax.With Kmart hobbled by bankruptcy, it is Target that now gets the attention of Wal-Mart Stores, the biggest retailer in the land and the biggest company, too. Every successful step that Target takes -- signing designers to make baby bottles and little black dresses, moving deeper into the grocery business, persuading more and more upper-middle-class shoppers to become upper-middle-class bargain hunters -- brings it into closer confrontation with the $218 billion behemoth that is Wal-Mart.At stake are the wallets of the growing number of consumers who shop discount stores by choice.In most respects, the Target Corporation -- which also owns the Marshall Field's and Mervyn's department stores -- is performing spectacularly well. It reported sales of $39.9 billion for the most recent fiscal year, mostly from its 1,100 Target stores, pushing it ahead of the beleaguered Kmart to make Target the nation's second-biggest discounter. Analysts are impressed with its earnings, which soared 36 percent, to $345 million, in the most recent quarter as revenue increased 15 percent, to $9.59 billion. Their enthusiasm is reflected in Target's share price, which rose 27 percent last year, although it is off around 6 percent this year.By comparison, Wal-Mart's sales in the first quarter rose 14.4 percent, to $55 billion. Its net income in that period jumped 19.7 percent, to $1.7 billion.Shoppers go to Target for a selection that includes detergent and batteries, in the tradition of all discount stores, but also for designs from Philippe Starck, Stephen Sprouse, Sonia Kashuk and Todd Oldham that can be found only at Target. (Executives say good design should be democratized.)''I like the idea of having good design at affordable prices,'' said Sarah Ettenberg, a decorative-arts expert in Manhattan who shops for Michael Graves and Philippe Starck housewares but also pairs Target blouses with more expensive slacks she buys elsewhere.WITH an image perpetuated with distinctive, arty ads -- and lots of them -- the Target chain is by far the best-performing unit of the parent corporation. In the first quarter, Target stores provided 89 percent of the company's pretax profit, up from 82 percent last year. In 2001, 92 percent of the corporation's capital spending, or $2.9 billion, went to the Target chain.Target's senior executives say they are just starting. ''We feel we can double our current size and triple our volume over the next seven to eight years,'' said Robert J. Ulrich, the chairman and chief executive, whose lean and rangy look, complete with black cowboy boots, suggests the Marlboro Man more than a mass merchandiser.But that will mean even more scrutiny from Wal-Mart, which once preoccupied itself...

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