Target Corporation (TGT), Wal-Mart Stores, Inc. (WMT): Aiming For Green

In fact, in the last quarter, Target’s gross margin of 30.79% was second only to Kohl’s Corporation (NYSE:KSS) at 36.39%. While Wal-Mart Stores, Inc. (NYSE:WMT) fights with Amazon for lower margin sales, these companies can keep their 24.66% and 26.15% margins respectively. The fact that at this point nearly 80% of Target’s locations offer either an “expanded grocery selection” or are SuperTarget locations, makes the company’s gross margin even more impressive.

Why Buy Now?
Target Corporation (NYSE:TGT) finally took a step that it seemed like never would happen. The company is expanding outside of the U.S. into Canada. While this was talked about all last year, and the company is still feeling the short-term pain of this investment, longer-term this is great news.

The company’s willingness to step into Canada means this country will now have access to the cheap-chic of Target stores. I firmly believe the Target shopping experience of less crowded aisles than Wal-Mart Stores, Inc. (NYSE:WMT), and less sales to navigate than Kohl’s, will do well internationally. The expected passage of a bill to tax Internet sales should help level the playing field dramatically when it comes to Amazon.

Amazon.com, Inc. (NASDAQ:AMZN)’s torrid growth is already slowing down. The company’s general merchandise sales growth slowed from 40% last year, to 30% this year. In addition, Amazon’s digital sales aren’t growing as expected, with sales growth slowing from 19% last year to 10% today. The truth is, Amazon is more of a traditional retailer than they were last year.

A second reason to consider Target Corporation (NYSE:TGT) today is, the company’s stock looks like a decent value. Analysts expect earnings growth of 11.63%, and the shares yield over 2%. When you combine this with a P/E ratio of less than 16, the shares look reasonably valued. Relatively speaking, Kohl’s offers a higher yield, but can’t match Target’s expected growth rate. Walmart’s dividend yield is even less than Kohl’s, and again, the company isn’t growing as fast as Target. When it comes to Amazon, the company is expected to grow earnings by 37%, but at nearly 200 times this year’s projected earnings, the stock is far too expensive for my taste.

Target’s expansion into Canada should drive future growth, and moving into the summer, sales should pick up compared to the first quarter. With a good combination of growth and income, this company’s red logo could mean green for investors.

Chad Henage owns shares of Target. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Chad is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Aiming For Green originally appeared on Fool.com and is written by Chad Henage.

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