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In the face of all this, it’s not surprising that Target has dialed back its growth expectations. It didn’t get much attention at the time, but Target this fall told investors that it had backed off its ambition to reach $100 billion in revenue in 2017.
First put in front of investors in 2011, the 2017 plan called for 5 percent sales growth from its U.S. operations, with about 3 percent from stores already open and about 2 percent from new store openings. That would be enough to generate $94 billion in sales by 2017, and with $6 billion coming from the big expansion in Canada, the company would hit the century mark.
Mulligan told investors that what’s now realistic is that U.S. operations can grow an average of perhaps 3 to 4 percent through 2017, allowing the U.S. segment to reach the mid-$80 billion neighborhood.
“While the top line growth is not what it once was,” he said last week, “we believe we have the outstanding opportunity, and the strategies in place, to drive significant shareholder value growth.”
Target actually hopes to make just as much money per share as in its old $100 billion plan. What’s different is how.
The company expects to spend at least $1 billion less on capital investment next year and beyond, compared with 2013, with fewer new stores. The company also expects to be working hard at maintaining margin. With the cash flow and the ability to maybe add some debt, the company thinks it can repurchase up to $4 billion of stock in 2014 and every year beyond. This would have the effect of boosting earnings per share by spreading earnings over fewer shares.
A lot has to go right for Target to achieve its goals, but even if it all comes together, the company will be spending less to reach its earnings-per-share goal rather than selling more.
With Target, we really had come to expect more.
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