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Target Corporation Essay

Target Corporation was founded in 1902 in Minneapolis as the Dayton Dry Goods Company, though the first Target store was opened in 1962 in nearby Roseville, Minnesota. Not until 1995, was the first Super Target was built. In 1999 Target launched their website Target.com. Target grew and eventually became the largest division of Dayton Hudson Corporation, culminating in the company being renamed as Target Corporation in August 2000.

The Corporation became a major retailing power house with $52.6 billion in revenues from 1,397 stores in 47 states by 2005. Realizing a 12.1% sales growth over the past five years target had announced plans to continue its growth by opening approximately 100 stores per year in the United States in the foreseeable future. Target is the second largest discount retailer in the United States behind Wal-Mart and ranked at number 33 on the Fortune 500 as of 2010. Target will operate 100 to 150 stores in Canada by 2013, through its purchase of leaseholds from the Canadian chain Zellers.

Doug Scovanner, CFO of Target Corporation, was one of the five executive officers who were members of the Capital Expenditure Committee (CEC). The CEC were meeting on November 14, 2006 where 10 projects representing

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nearly $300 million in capital-expenditure request were to be reviewed. In reviewing the 10 projects coming before the committee, it was clear to Scovanner that five of the projects, representing $200 million in requested capital, would demand the greater part of the committee’s attention and discussion time during the meeting. The five projects are Gopher Place, Whalen Court, The Barn, Goldie’s Square and Stadium Remodel.

Gopher Place was a request for $23.0 million to build a PO4 store scheduled to open in October 2007. The prototype NPV would be achieved with sales of 5.3% below the R&P forecast level. This market was considered very important with five existing stores already in the area. Wal-Mart was expected to add two new supercenters because of the favorable population growth in the trade area. Considering the high density of Target stores, nearly 19% of sales included in the forecasts were expected to come from existing Target stores.

Whalen Court was a request for $119.3 million to build a unique single-level store scheduled to open in October 2008. The Prototype NPV could be achieved with sales of 1.9% above the R&P forecast level. The Whalen Court market seemed to be a rare oppurtuinity for Target to enter the urban center of a major metropolitan even though they currently operated 45 stores in this market. The opportunity provided Target with essentially free advertising for all passerby and brand visibility. Unlike the majority of Target stores, this store would have to be leased.

The Barn was a request for 13.0 million to build a PO4 store scheduled to open March 2007. The prototype NPV was achievable with sales of 18.1% below the R&P forecast level. This investment represented a new market for Target as the two nearest Target stores were 80 and 90 miles away.

Goldie’s Square was request for $23.9 million to build a Super Target store scheduled to open in October 2007. The prototype NPV required sales 45.1% above the R&P forecast level. Despite the relatively weak NPV figures, this was a hotly contested area with an affluent and fast-growing population, which could afford good brand awareness should the growth materialize.

Stadium Remodel was a request $17.0 million to remodel a Super Target store opening March 2007. The recent sales decline and deteriorating facilities at this location could lead to tarnishing the brand image. This store has been remodeled twice since 1972 and the investment would certainly give a lift to the lagging sales.

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