Target has considerable opportunity for expansion. The company just opened 24 stores in Canada, which are the first stores for the retailer outside of the U.S. This year Target plans to have a total of 124 stores in Canada. Target also is looking to start selling groceries in its stores. Even though groceries have low margins, they get customers into the stores more often, which hopefully leads them to purchasing higher-margin items as well.
Target is also seeing increased sales of its REDcard. Each debit or credit card offers the user 5% off all purchases at Target when the REDcard is used. Users of the card also get free shipping on all goods purchased online. Target has already seen the results of this initiative with 17% of all sales in the first quarter conducted using the REDcard compared to 12% in the prior year’s quarter.
The potential for Wal-Mart is in continued international expansion and it is ahead of its competition in that regard. In terms of Wal-Mart’s $470 billion in sales, the company gets 29% of its sales internationally. The company already has a strong presence in Mexico and in the last two years expanded into the United Kingdom and Africa. The company still has only a small presence in China with 394 stores and only 20 stores in India. Wal-Mart has no presence in Russia or Indonesia.
Wal-Mart also has considerable opportunities in the e-commerce segment. Even though the company has stumbled in the past with its online initiatives, things are starting to turn around in that department. In the first quarter of this year, online sales grew 30% compared to last year. Online sales have been picking up overseas as well with online sales in the U.K. And Brazil growing as well. Consider that online sales represent only $8 billion of Wal-Mart’s total sales and you can see the potential for growth for the company.
Foolish assessment
Bed Bath & Beyond Inc. (NASDAQ:BBBY) is still the place to shop for home furnishings. The company has carved out a niche and has a steady customer base. Target and Wal-Mart offer a little bit of everything and have room to grow online and internationally. Even though I like Bed Bath & Beyond for its core business, all three companies are worthwhile investments in the long term.
Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Bed Bath & Beyond. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article This Home-Furnishing Retailer Is Still the Place to Shop originally appeared on Fool.com and is written by Mark Yagalla.
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