This document compares the financial performance of Target and Costco from 2008-2013. It analyzes various financial ratios to compare the companies' debt management, asset management, profitability, liquidity, and market value. The analysis found that while both companies were impacted by the 2008 financial crisis, Target's stock price and debt levels fell further due to its reliance on debt. Costco recovered more quickly from the crisis and has shown steadier growth. The document also discusses the future prospects of both companies, noting Target's debt burden as a risk factor while Costco may face challenges from vendor competition and labor issues.

1. Financial Comparison of Target
and Costco Corporations
By: Roya Saqib and Nadine Walker-Mooney
July 30th 2014
COST TGT

2. Financial Analysis of Target and Costco Corporations
Introduction to the Department Store Industry
Introduction of Target Corporation-- corporate History and impact of sub-prime
mortgage crisis of 2007-2008
Introduction of Costco Wholesale Corporation--corporate History and impact
of sub-prime mortgage crisis of 2007-2008
Financial Ratio 2008 and 2013 Comparisons
Stock Price Comparisons of Target and Costco With S&P500
Question and Answer

3. Introduction to the Department Store Industry
Costco an Target Corps, function within the department store industry. In this industry Companies engage in selling a wide
range of products with no one merchandise line predominating. These products include apparel, furniture, appliances,
home goods, paint, hardware, toiletries, cosmetics, photographic equipment, jewelry, toys, and sporting goods.
In general this industry was impacted hugely by subprime crisis from 2008 to 2010. But the companies were impacted
differently due to different factors.
Target Corporation– Brief Overview:
2nd Largest Store Discount Retail in the United states. #36th in Fortune 500
Hudson Dayton company (retail store company) founded in1902, 1962 first discount target store, 1965. In 2000 E-commerce
and name was changed to Target Corporation
Three segments (US retail, Target Credit Card, and Canadian) International expansion in 2011
DATA Breach 2013, affected its profit margin, stock prices in last quarter, and reputation.
Recovered in 2014
Stock prices fell down by 54% in 2008 FY. Because Target is depending largely on debt as you will see in our ratios

4. Costco Wholesale Corporation-Brief Overview
Introuduction of Costco Wholesale Corporation
Corporate History
Affects of sub-prime mortgage crisis of 2007-2008

5. Debt Management Ratio-The Lower, the Better
124.11%
Debt to Equity Ratio
221.66%
171.34% 174.49%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
COST 2008 TGT 2008 COST 2013 TGT 2013
55.16%
Total Debt Ratio
68.91%
62.57% 63.57%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
COST 2008 TGT 2008 COST 2013 TGT 2013

6. Debt Management Ratio-The higher, the Better (should be at least 1)
19.18
Times Interest Earned Ratio
4.08
30.84
2.76
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013

7. Asset Management Ratio-The higher is the Better
3.50
Total Asset Turnover
1.43
3.55
1.63
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013
14.08
Inventory Turnover Ratio
9.38
12.30
8.28
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013

8. Series1
50.00
40.00
30.00
20.00
10.00
0.00
Asset Management Ratio-The Lower, the Better
3.77
Days Sales Outstanding
46.92
4.17 0.00
COST 2008 TGT 2008 COST 2013 TGT 2013

9. 1.77%
Profitability Ratios--The higher, the Better
Profit Margin
3.52%
1.96%
2.72%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
COST 2008 TGT 2008 COST 2013 TGT 2013
Return on Asset (ROA)
6.20%
5.02%
6.95%
4.42%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
COST 2008 TGT 2008 COST 2013 TGT 2013

10. Profitability Ratios--The higher, the Better
13.95%
Retuen on Equity (ROE)
16.15%
19.03%
12.14%
20.00%
18.00%
16.00%
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
COST 2008 TGT 2008 COST 2013 TGT 2013

11. Liquidity Ratios--The higher, the Better
1.07
Current Ratio
1.66
1.21
0.91
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013
0.50
Quick Ratio
1.03
0.58
0.22
1.20
1.00
0.80
0.60
0.40
0.20
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013

12. Market Value Ratios
Price Earning Ratio (P/E) The higher the
23.20
better
10.27
24.16
18.19
30.00
25.00
20.00
15.00
10.00
5.00
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013
Equity Multiplier. The lower, the better
2.25
3.22
2.74 2.74
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
COST 2008 TGT 2008 COST 2013 TGT 2013

13. Stock Prices from end of 2008 to present
Target Corporations (TGT). Falling from $61 in 2007 to $28.31
(-54% change) in 2008 FY. While it recovered very slowly from
2009 to 2013.
Coscto Corporations (COST). Was not impacted much in the
first 2 quarters of 2008 and its stock Price was around $ 64 till
Sep 2008. However, at the end of 2008 FY (Sep 2009) prices
fell to $56.38 (-13% change). Recovered quickly by the end of
2010 FY, as the price rose to $64.93 again and it has been
steadily rising since then to over $115

14. Stock Price Changes from 2008 to 2014, comparing to S&P 500.

15. Future Prospects Target:
 The company's revenue increased from $69.86 billion in 2012 to $73.3
billion in and its net income increased from $2.92 billion in 2012 to $2.99
billion in 2013
 Its dividend had continuous growth over 47 years. had a growth of 20%
over the past 10 years. Current 3.6% dividend.
With the rising trend of e-commerce business, there is huge potential for
the company to increase its profitability through its online business.
 Huge debt burden is making it a risky investment and vulnerable to market
fluctuation and economic changes.
 Any reduction in revenues and operating cash flows could hinder the
company’s ability to repay interest and principal, resulting in default.

16. Future Prospects:
 According to Costco Warehouse Corporation, their future prospects for
strong growth can be insured by enhancing its e-commerce retail
operations, by opening new stores in new communities and by
infiltrating current markets. By 2018, Costco plans to double its 608
number of warehouses.
 But, despite Costco’s steady addition of quality vendors and the quality
products these vendors produce along with the fair prices Costco pays
for their products, the biggest threat to its expansion appears to be
from its high dependence on these vendors who are challenged by
growing competition and labor issues.
 Costco is optimistic, however, that the excellent relationships it has with
its vendors, and its constant search for new ones, will weather any
threats to its long-term strategic growth.

17. Questions