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Financial Comparison of Target 
and Costco Corporations 
By: Roya Saqib and Nadine Walker-Mooney 
July 30th 2014 
COST TGT
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
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
Costco Wholesale Corporation-Brief Overview 
Introuduction of Costco Wholesale Corporation 
Corporate History 
Affects of sub-prime mortgage crisis of 2007-2008
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
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
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
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
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
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
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
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
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
Stock Price Changes from 2008 to 2014, comparing to S&P 500.
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.
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.
Questions

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A Financial Analysis comparison of Costco and Target Corp.

  • 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.

Editor's Notes

  1. Coscto Corporations (COST). Was not in first 2 quarters of 2008 and Price was around $ 64 till Sep 2008, but at the end of 2008 FY (Sep 2009) prices fell to $56.38 (-13% change). Rrecovered 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