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Globe and Mail
22-07-2025
- Business
- Globe and Mail
Does Target's Store-as-Hub Model Still Offer a Competitive Edge?
Target Corporation 's TGT store-as-hub model remains a pivotal competitive moat, seamlessly blending the physical and digital shopping experiences to enhance customer convenience. Despite facing macro pressures, Target has leaned heavily on its nearly 1,981 store locations (as of May 3, 2025) to drive both in-store and digital fulfillment. 96% of first-quarter fiscal 2025 sales volume were fulfilled through stores, underscoring the efficacy of this model. The model enables faster delivery, enhanced customer convenience and cost efficiencies that pure-play e-commerce retailers struggle to match. Same-day services, including Drive Up and same-day delivery through Target Circle 360, are tightly integrated into this store-as-hub network. These offerings have shown robust momentum, with same-day delivery growing more than 35% in the last reported quarter. Furthermore, the average "click to deliver" speed improved nearly 20% year over year, with more than 70% of first-quarter digital orders fulfilled within a single day. This infrastructure actively drives higher engagement and supports the digital ecosystem, including Roundel and Target Plus. Furthermore, ongoing store remodels and commitment to opening about 20 new stores indicate Target's belief in this strategy. While competitors may chase similar omnichannel capabilities, Target's embedded network and operational experience position it to maintain a meaningful advantage in fulfillment speed. Despite recent sales challenges, the store-as-hub model remains integral to Target's growth playbook, offering flexibility, efficiency and relevance in the current retail landscape. How WMT and BBY Leverage Store-as-Hub Models Compared to TGT Walmart Inc. WMT continues to strengthen its store-as-hub model, using its expansive store network to power same-day pickup and delivery. Walmart's integration of stores with digital fulfillment remains a key competitive advantage, supporting its U.S. e-commerce orders through store-based operations. Walmart's ongoing investments in automation and last-mile delivery reinforce this strategy, allowing it to compete aggressively on speed and convenience. Best Buy Co., Inc. BBY also leans heavily on its store-as-hub strategy, utilizing its store fleet to fulfill a significant portion of online orders through same-day pickup and ship-from-store. Best Buy's stores enable rapid fulfillment, while enhancing operational efficiency. Best Buy's ability to leverage physical locations as fulfillment hubs strengthens its competitive positioning. Target's Price Performance, Valuation and Estimates Target stock has risen 10.4% over the past three months compared with the industry 's growth of 0.3%. Target's forward 12-month price-to-earnings ratio of 12.99 reflects a lower valuation compared with the industry's average of 31.61. TGT carries a Value Score of A. Image Source: Zacks Investment Research The Zacks Consensus Estimate for Target's current financial-year sales and earnings per share implies a year-over-year decline of 1.8% and 14.8%, respectively. Target currently carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks' Research Chief Names "Stock Most Likely to Double" Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest. This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%. Free: See Our Top Stock And 4 Runners Up Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Target Corporation (TGT): Free Stock Analysis Report Walmart Inc. (WMT): Free Stock Analysis Report Best Buy Co., Inc. (BBY): Free Stock Analysis Report
Yahoo
13-06-2025
- Business
- Yahoo
This Dividend King's Hike Is Bigger Than You Think
Target boosted its dividend by less than 2% this week. The shares are yielding 4.6%. The chain is struggling through a third fiscal year of declining sales, but it can afford to increase its dividend given the reasonable payout ratio. If it continues to lose market share in the coming year, it may want to choose a different deployment path than a dividend hike for its cash flow. 10 stocks we like better than Target › Target (NYSE: TGT) made it official on Thursday. The mass-market retailer lived to keep its Dividend King crown another year. Target boosted its quarterly dividend rate, something that the chain operator has now done for 54 consecutive years. It wasn't much of an increase. The new quarterly distribution rate of $1.14 a share is just a pair of pennies -- or 1.8% -- higher than the old dividend. Target stock has moved exactly 2% higher just through the first four trading days of this week, so its forward yield of 4.6% is just a smidgeon lower than it was when the week started. This is still a pretty big move for Target. Let's zoom in on the retailer's storefront logo to see if it hit the bull's-eye this week. The timing of the payout boost isn't a surprise. As I pointed out earlier this week, Target has announced its annual increase between June 9 and June 15 over the last several years. If it was going to go through with another hike it was going to happen this week. The new rate also isn't a surprise. Target also moved its quarterly dividend two pennies higher last June. Target has the earnings wiggle room to go higher, but it's the wrong message to send when the "cheap chic" chain has some issues to figure out. Thursday's move was about checking a box, keeping income investors satisfied until it drums up a way to win back the growth investors that have meandered elsewhere. Target's net sales have declined slightly in back-to-back fiscal years, and this year is off to another challenging start. Comps declined 3.8% in the fiscal first quarter that it posted last month, and it's even worse at the physical store level. Digital comps are 4.7%, fueled by the growing success of Drive Up orders and Target's Circle 360 premium loyalty platform. Inside the actual stores, comps are down 5.7%. Thankfully the chain remains more than profitable to cover the more than $500 million it's shelling out every three months in shareholder distributions. Target's guidance calls for adjusted earnings per share to clock in between $7 and $9 this year. The new dividend will set Target back $4.56 a share, translating into a forward payout ratio of 51% to 65%. It's a reasonable ratio, sustainable if it can start growing again. Thankfully analysts see a return to growth on both ends of Target's income statement by next year. It's comforting to know, but investors have been burned by other retailers failing to turn things around after suffering popularity hiccups. Target's 4.6% yield is notable. The stock shedding almost a third of its value has pushed up the dividend from roughly 3% a year ago. Short-term rates on the money market funds have gone the other way, and now Target is generating more income than many short-term fixed income options. This isn't necessarily a badge worth wearing. There are only a couple of department store operators currently dedicating a larger cut of their market caps to quarterly disbursements. Macy's is yielding 6.1%. Kohl's is at 5.7%, and that was after slashing its dividend by 75% earlier this year. Dillard's makes the cut on a trailing basis only because of a one-time distribution of $25 a share it made late last year, but the forward rate is microscopic. This isn't a club that Target may want to be a part of right now. Those shareholders are bracing for sharp declines in profitability this year, along with sliding sales through these next two fiscal years. Cutting fat checks while their boats are taking on water isn't a financially seaworthy approach. Target isn't in the same boat, at least not yet. It still has time. If it coughs up the Dividend King crown next June because it has a better use for its earnings -- as in making sizable investments to turn shopper perception around -- it wouldn't be a bad thing. The income investors won't be happy, but if it's a bridge to winning back the growth investors, swapping income for capital gains is a smart trade. Target chose complacency this time. If it can't plug the leak a year from now it could be time to chart a new course. Before you buy stock in Target, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Target wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $655,255!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $888,780!* Now, it's worth noting Stock Advisor's total average return is 999% — a market-crushing outperformance compared to 174% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of June 9, 2025 Rick Munarriz has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy. This Dividend King's Hike Is Bigger Than You Think was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
