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Target Corporation Financial Analysis

Updated August 26, 2021
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Target Corporation Financial Analysis essay

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The company I choose for my final project is Target Corporation. Target Corporation better known as Target is a well-known discount department chain. Target Corporation was founded in the year 1902 by George Draper Dayton. When founded in the year 1902 it started off as Dayton Dry Goods Company, and Dayton Company. Dayton Company/ Dayton Dry Goods Company was not renamed Target Corporation until the year 1962.

Target Corporation is a public company and as of January 2017 Target Corporation 1,802 stores spread throughout the United States; 49 out of the 50 states; Vermont does not have a Target Corporation store in the state. Target Corporation includes the following products in their household essentials, food, beverage, pet supplies, apparel, accessories, home furnishing, decor, and hardline items such as electronics, appliances, sporting goods, and bicycles.

Target Corporation is a well-known general merchandise retailer for selling products everyone loves Target Corporation has their own brands such as Archer Farmers, Cat & Jack, Xhilration, up & up, Threshold, and Project 62. Target Corporation has been opening their horizon and bringing new brands and some exclusive only to Target Corporation such as Heart & Hand, Hunter, Universal Thread, Who What Wear, A New Day, Goodfellow & CO, and Umbro.

Target Corporation competes with top competitors such as Amazon, Walmart, Kohl’s, Publix, and Costco. Target Corporation sells their products online with different sizes and color options not available in stores. Recently Target Corporation has started offering customers buying online and picking up their products in stores like Walmart does, but Target Corporation has taken it up a step further by offering Drive Up where you shop online and get your products delivered to your car once you arrive to a Target store.

Income Statement Analysis

Yes, the following have changed over the past three years total revenue, total cost of revenue, and net income. A reason why these numbers could have changed over the past three years may due to cost of goods sold. Each target store most meet a certain number for sales if they do not reach their targeted goal for sales that effects the total revenue for Target Corporation.

Target Corporation’s current ratio is 0.94 meaning if Target Corporation were to take its current supply of cash and add to it the proceeds of liquidating its other assets would be 11,990.00. That 11,990.00 would allow for the company to cover the short-term obligations of 12,708.00 for about 0.94 times, which leaves no cushion money for anything due to 11,990.00 – 12,708.00 = -718. Which means Target Corporation would not have any money left over for anything the company may need money for.

Balance Sheet Analysis

Yes, these numbers have changed over each year. As you can see from 2015 the total assets were $41,172,000 and decreased by $910,000 2016 and by $2,831,000 in 2017. A reason for such a decrease may be due to the fact that Target Corporation has been closing stores in the United States since 2016. Closing multiple stores across the United States has allowed for Target Corporation to decrease their number of total assets and liabilities due to the fact that they have closed properties.

Although Target Corporation has closed multiple locations they have also opened multiple stores which means they have spent more money on equipment which may reason why the number of liabilities has decreased by much. Target Corporation Debt-Equity Ratio for 2017 was 1.16 which shows how Target Corporation debt was used to finance its assets.  The debt-equity ratio can be misleading because it does not take into consideration how much of the debt comes from long term debt or short-term debt. The debt-equity ratio can be good when it shows for different financial periods it will allow for seeing if the company is being funded by debt.

Cash Flow Analysis

Over the past three years an there has been an increase in cash flows from operating activities since 2015. A reason why such an increase occurred from 2015 to 2016 is due to the fact that target closed down all of their Canada stores during 2015. Since closing down operations in Canada allowed for target to decrease operating cost such as the cost of labor for Canada stores.

A decrease in 2016 to 2017 may be due to the fact that Target has been expanding and remolding some stores in the U.S. Over the past three years you see an increase for investing activities from 2015 to 2016 this is due to the fact that target announced in 2015 that it would be revamping the customers experience in the next year via merchandize changes and opening up TargetExpress locations in some areas.

From 2016 to 2017 you see another decrease this is due to the fact that Target Corporation opened up 30 small format stores, enhance their Cartwheel app to be a part of the Target app, launched new brands (Cat & Jack, and Pillowfort). Target Corporation announced in December of 2015 that CVS Health acquired completely all of Target’s pharmacy and clinic businesses. Target Corporation exiting Canada also effected their financing activities from 2015 to 2016.  Data breach that occurred in 2014 also effected financing activities in 2015 and 2016 due to customers claims from the breach.

Another reason for an increase in financing activities increasing from 2016 to 2017 is due to the fact that Target corporation launched eight exclusive brands throughout 2017 one being Hearth and Hand with Magnoila. Also, another reason for an increase in financing activities increasing from 2016 to 2017 is Target Corporation announcing it would acquire Shipt in December 2017 and would store shipt in early 2018. Over the past three years you see a change in numbers over the years is due to the short and long-term debt the company owes.

Also, a key part of these numbers changing over the years is paying dividends to shareholders’. EBIT Return on Assets is used to calculate earnings before interest and tax (EBIT) to total assets. Which shows the company’s profitability and company’s assets, which in turn shows how efficiently management has used assets. I searched to see what a good EBIT Return on Assets range would did not find one. Since the EBIT Return on Assets for Target Corporation is 0.12 I would imagine that is a good margin. It does not seem too high which shows that Target Corporation management is using assets to good use.

Conclusion

In conclusion after reading and researching more into Target Corporation I have learned various things that I would not ordinary have known as just a regular consumer/customer at Target. One thing that I found interesting while writing my paper is current ratio for Target Corporation as an employer for Target Corporation I did not think that my company may not have enough assets to cover current liabilities if something were to occur. As an employee you see various transactions done and sometimes lead customer to buy certain products when helping them find a product; you think your company makes a lot of money but do not take into account if the company’s debts and current liabilities that need to be paid.

Which brings me into my next interesting topic that I found was doing the cash flow analysis for Target Corporation. Seeing how much cash Target Corporation actually had for operating, investing and financing activities. You get to see how a company changes over the years and what they do to improve their company for customers. I have come to the conclusion that Target Corporation does well for company that competes with Walmart and Amazon for sells. I think Target Corporation investing in exclusive brands only to Target helps when competing against lower prices and delivery to your door.

Target Corporation Financial Analysis essay

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Target Corporation Financial Analysis. (2021, Aug 26). Retrieved from https://samploon.com/target-corporation-financial-analysis/

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