Introduction

Today’s retail market has become more competitive than ever. With hundreds of retail outlets catering to American consumers, retail companies must continue to invoke a number of unique and diverse strategies in order to gain customer loyalty while also attracting new customers in order to stay a float in the retail game. Today’s economic climate, in which consumer spending has declined, presents even more of a challenge to savvy CEO’s. Target and JC Penney represent two of the major players in the retail arena. Both have long and proven track records of maintaining sales, and even expanding, despite economic downturns and set backs. In order for both of these companies to maintain their rankings into the future will be a challenge. This is due to the fact that the way in which business is conducted has shifted. For example, a good percentage of retail business is now conducted online and in order for a retail store to remain competitive, they must create a strong presence on the Internet. In addition, a drop in consumer spending means that companies must work harder to gain, and maintain, a loyal customer base. 2010 was a definitive year for many retail companies. Not all came out ahead. However, both Target and JC Penney managed to stay in the black, to varying degrees, mainly due to business savvy and innovative marketing techniques.

Selection/Companies

The JC Penney and Target Corporations represent those retail companies who have succeeded in the long run and have come out ahead despite the topsy turvy world of economics and politics. The strategies employed by heads of both corporations are similar – providing customers with a quality, reasonably priced product coupled with excellent customer service. Both have made a strong presence on the Internet, a fact which led to much of the success these companies enjoyed during 2010. However, of the two companies, it can be seen that Target Corporation substantially better than JC Penney. Fitch Ratings, and international ratings agency, gave the Target Corporation an ‘A’ for 2010, meaning the company is on stable ground (Reuters, 2011). JC Penney, on the other hand, was given a more cautious rating of ‘BBB-‘.

These companies were selected for research due to their ability to withstand drastic changes in market and economics. JC Penney and Target were both started in the early 1900’s, over a century ago. They both survived dramatic market downturns, such as the Great Depression, and this is an indicator that the prevailing business philosophy of these two businesses has been largely successful. Studying these two companies, and understanding which of their techniques have led to their success, can help business owners to understand what they can do to make their own businesses competitive and successful.

Current Ratio/ Profit Margin/ Book Value per Share

The real profitability of Target Corporation and JC Penney, Inc can be analyzed using the companies financial statements from 2010.

Discussion and Analysis

Target has seen an increase in total overall revenue in every year since 2006. Despite the setbacks that came with the economic collapse of 2008, Target has managed to increase its sales and revenue up to 2010. 2010 was a very successful year for Target, resulting in net sales of $65.8 billion, a number that does not include revenues from credit cards (Target, 2011, p.1). In 2008, Target saw a downturn in in-store retail sales which forced it to revisit its marketing philosophy. The result was a dramatic facelift to its retail stores. Stores were remodeled with softer lighting and informative signs. Some stores were outfitted with a fresh produce section (Target, 2011, p. 2-3). Knowing that consumers were looking to make their dollar stretch, Target refocused on its slogan of “Expect More. Pay Less.” In addition, Target cut its capital expenditures by $1.5 billion. By increasing sales and cutting spending, Target has maintained its hold on the retail market and continues to be a stable market investment.

JC Penney has had less success with its marketing strategy though it still maintains a strong hold on the market. The strategy utilized by the company has been similar to that utilized by Target. Individual retail stores were given a make over to make them more attractive to consumers. This included the incorporation of Modern Bride and Sephora departments into individual stores. According to the 2010 JC Penney Annual Report, “Comparable store sales rose 2.5% and online sales increased 4.4%” (JC Penney, 2011, p.4), indicating that the company has been successful in promoting both its retail and online stores.

Despite JC Penney’s success, it must still compete with the Kohl’s department store chain, its major retail competitor. According to Fitch, the main challenge to JC Penney meeting its future goals will be to close the 20% store productivity gap it has with Kohl’s. One of the challenges facing the company is that many of its retail stores are over 20 years old, meaning that the company must spend a great deal on remodeling in order to keep their stores current and competitive (MarketWatch, 2011). Since these two chains have a significant amount of overlap, JC Penney will have to continue to utilize effective strategies, such as maintaining a loyal customer base using incentives such as excellent customer service, to maintain its competitive edge.