One thing that both Wal-Mart and Target are moving toward are smaller stores, which will be easier to access and navigate for customers. Target Corporation (NYSE:TGT)s smaller store plans include a 60,000 to 100,000 square foot complex, where the average 125,000 to 180,000 square feet for current stores.Target is a bit less diversified with respect to its geographical span, operating in limited markets, but it is looking to open stores internationally, including in Canada and Latin America. The company plans to open 125 to 135 stores in Canada by 2013 and 2014. Wal-Mart operates on a very large scale and should continue putting pressure on Sears. The retailer also operates the warehouse retailer, Sam’s Club.
To give you an idea of the scale that Wal-Mart and Target Corporation (NYSE:TGT) operate on in comparison to Sears, just look at how their revenues stack up. Sears generates some $40 billion in revenue, Target $73 billion, while Wal-Mart generates a whopping $469 billion. Sears also only operates some 4,000 stores, compared to Wal-Mart’s 10,700.
Wal-Mart 0.5x
Target 0.5x
Wal-Mart 6%
Target 3%
Wal-Mart 13%
Target 8.5%
Wal-Mart 9%
Target 11.5%
Don’t be fooled
Sears does have some support from other major hedge funds, but not the support of Wall Street. The average Wall Street price target is $17, which is 65% downside, and Wall Street expects a negative 164% annual EPS growth rate over the next five years; it’s tough to own Sears right now. The news has been well circulated that Sears has inherent value in its real estate portfolio, but it appears the market doesn’t really care. In reality, the real estate may well be a moat, but there is not a “catalyst” that will move the stock higher. The company also has $40 per share in debt and I’m not willing to invest on its real estate value alone.
The article Follow Billionaire Eddie Lampert’s Lead at Sears? originally appeared on Fool.com and is written by Marshall Hargrave.
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