Target Corp (NYSE:TGT)

CAPS Rating: 3 out of 5

The country’s second-largest discount chain, Target shoots to be more upscale than rivals with a focus on design.

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Player Avatar witness1260 (90.08) Submitted: 4/5/2013 5:16:28 PM : Outperform Start Price: $66.08 TGT Score: -33.34

I have to say, I really like Target's business model. They've convinced people to pay a higher price for the same item at their store versus at a rival's (looking at Wal-Mart). Look at how people think about shopping at Target. Look at the top pitch on this stock, who says he "feels poor" when he shops at Wal-Mart. There's a whole group of people who wouldn't be caught dead in that place. No one is saying any other similar retailer's name with a (facetious, true) French accent. Shopping at a place like Target has some weird status symbol thing going on.Which is why Target has higher margins than rivals, even though they're selling the same product. They have margins a good 8% higher than Wal-Mart, in spite of Wal-Mart's superior bargaining power with suppliers. (That doesn't sound like much, but keep in mind that these companies are operating on razor-thin margins) I think they've created a significant advantage here with their branding.I think that's an advantage that can stick as well, because the economy is improving, and if you think about it Wal-Mart shoppers want to become Target shoppers because it tells them they're doing well financially. I can see Target continuing to grow long-term. Clearly they see opportunities for growth as well. They've jacked up PPE spending.Short term, do we really think earnings are not going to change, or even decline, versus last year? I don't (but analysts do).

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