ACC 230_Week 9_Target Corporation’s Financial Health_Answer
Week 9 – Target Corporation’s Financial Health
Target Corporation was founded in 1902 by George Dayton, a banker and real estate investor, the original name was Dayton Dry Goods Company, later in 1911 becoming Dayton Department Store, and in 1962 becoming Target a discount chain store. Target and its iconic red bulls-eye, named because it is a marksman’s goal to hit the center mark, much as it was Target’s goal to do the same in terms of retail goods, services, community commitment, price, value, and overall experience (Target.Com, 2012). 1967 saw Target grow from a regional department store to national retailer. In 2009 Target expanded into the fresh food market nationwide, and in 2012 is celebrating its 50th anniversary; even after 50 years Target is still committed to its original values and the bulls-eye symbol.
Target has used innovative marketing strategy and teamed up with several high-end designers to offer affordable collections on a short-term basis to the masses, and has installed many Starbucks within their stores. Graves Design, Isaac Mizrahi, and Missoni are a few of the designers that have partnered with Target. Having a Starbucks inside the store seems to attract many customers who want to get a coffee and shop all at the same time. Target also offers its own brand of up-scale sundries marketed under the Up and Up brand. Target has a market presence which appeals too many
middle class Americans looking to get the most value for their money.
Target’s 2012 income statement reveals that there was an increase in revenue of 3.7% over 2011 along with increases in cost of goods sold and selling, general, and administrative expenses; even after the increases Target still increased its net earnings by .3% over 2011. Expansion is the main reason target had increases in selling, general, and administrative expenses and depreciation and amortization expenses. Operating income and operational profit margins increased in direct correlation with the increase in sales. In 2012 income before taxes has decreased ever so slightly from 2011, down .9%, with this change the provision for taxes has also decreased, leaving a slight increase in net profits.
The balance sheet seems to indicate that Target is in an expansion mode, but overall appears to be stable. Total assets have increased over 2011, but current assets including cash have decreased. The decrease in cash could be from financing the expansion. Property and equipment have increased over 2011, another sign of expansion. Total liabilities have decreased from 2011, with current liabilities increased and non-current liabilities decreasing. Most likely their short-term financing has increased to make up for the cash used in expansion, while they have met all of their long-term obligations. One significant reason liabilities have decreased is due to the decrease in non-recourse debt collateralized by credit card receivables.
Shareholder investments have increased slightly; most of this is probably because of the stock repurchase that was initiated during the year.
The statement of cash flows has operating cash flow increasing over 2011 by $163 million, cash flow required for investing activities has increased $2,435 million over 2011, while cash flow required for financing activities has decreased by $1,875 million from 2011. From the above results, I assume that cash flows from operations increased because they had a positive profit from operations, cash flow required for investing activities increased due to their expansion, and that cash flow required for financing decreased as they use more of their own cash for self-financing.
It is important to use trend analysis and company comparisons when evaluating the performance of a company. Using this information helps one determine if the company is within acceptable ranges, or has gone off-track into left field. When specific areas of differences are noted, management can determine what steps need to be taken to return to the track and head down the correct path. Trends and comparisons are not just about finances, they are about ways to capture income and increase net profits.
The retail industry is one of the largest industries in the world, by business numbers and employees. Plunkett Research Ltd. As of 2011 Wal-Mart was still the giant of the retail market. As Wal-Mart nearest competitor Target heats up the market, Target seems to be gaining in
customer loyalty and has picked up on Wal-Marts grocery strategy. According to the Plunkett report, recession ravaged consumers not only want dry goods at a discount, but they also want groceries discounted (PlunkettResearch.Com, 2012). Target also has been gaining customers who want stylish well organized stores that appeal to their senses.
After researching and reviewing the information that I gathered for this paper, I would invest in Target as I believe that they have a profitable stable future. As a consumer I would rather shop at Target than Wal-Mart, they are less cluttered and better organized. Target also carries more up-scale brands than Wal-Mart. Lastly, Target is involved in their commitment to the community; giving back money to each and every community they are involved with. Target is not only a sound business investment, but also makes the consumer feels as if he or she is helping the community.
Fraser, L. M., & Ormiston, A. (2007). Understanding financial statements (8th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
MSN.com. (2012, Winter). Investing MSN Money – Target Corporation. Retrieved from http://investing.money.msn.com
PlunkettResearch.Com. (2012, Winter). Major Trends Affecting the Retail Industry. Retrieved from http://www.plunkettresearch.com
Target.Com. (2012, Winter). Target throughout the years. Retrieved from http://sites.target.com
Target.com. (2012, Winter). Target financial statements. Retrieved from http://www.target.com
Target Corporation’s Financial Health Answer