Economics Of Target’s New Loyalty Program Seem Favorable
Analysts at Jefferies & Co reiterate their "buy" rating on Target (NYSE: TGT). The target price for TGT is set to $64.
Target has offered all its REDcard account holders a discount of 5% for purchases at its brick-and-mortar and online stores with effect from late Q3 or early Q4, in time for the 2010 holiday season. According to the analysts, “Management said the results were ‘overwhelmingly favorable, leading to meaningful incremental sales and profits.’ The response was strongest among the ‘better’ and ‘best’ customers, and while the basket remains similar, the program is resulting in higher frequency and thus driving sales.”
“The economics of the new program sound very favorable and we think it will serve as a fantastic marketing tool given the size of the discount… The new program is likely to result in a greater portion of sales occurring on Target credit and debit cards, which in turn should accelerate the slowdown in the portfolio's rate of decline, which had been running down 13% a few months ago,” Jefferies mentions.
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