For a class project we have to come up with a way for Target to increase their profits by 5% in 2-3 years, and show it quantified in an Excel model. I'm completely stumped on what they can possibly do to increase Net Income by $150,000,000 aside from opening a shitload of stores and taking on more cap ex expenses. Any ideas?
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how do you do this project without managerial data? I'd think 10Ks/Qs wouldn't provide enough detail for these kinds of cost-profit managerial decisions but hey fuck me right?
I've read every word on the last 2 years 10Ks like 5 times over. They don't break down items enough.
what kind of assumptions or speculations can you make? Can you take a line item and make assumptions about what sub-accounts it's comprised of?
disclosure: I'm not trying to guide you here, I'm just curious b/c I'm trying to learn more about managerial accounting and profitability cases
Off the top of my head: cut employees-- see if they have similar numbers of employees per store/sq ft to their comps ie wmt. Reduce expenses, ie negotiate better deals on merchandise other than that idk what your prof is looking for. If you can come up with a plan like that just from looking at public numbers than you should get hired by target
EDIT: Just thought of this--> Replace CEO/Board. Look at targets history since Ackman came into the stock...
I really think that this and what Ello is saying are the absolute easiest ways to do it. If they expect you to come up with hard numbers, just find out how many employees per store they have and what percent of their expenses wages comprise, then remove it from that to yield a 5% gain.
Or, as Ello says, if you're not expected to model out hard numbers, just do some qualitative analyses and you'll be good.
Is this supposed to be business or accounting manipulation?
You really can't be wrong if it's a feasible answer...bear in mind this is a class not a presentation to the board. If you utilize some of the things you learned in class thus far (blatantly helps with some professors) how can that be wrong? Idk reduce SG&A by making stores more energy efficient or some bs, replacing the board or some of the board was a good suggestion...lots of options
Invest maybe ~$40-50 million in an e-commerce fulfillment center in the middle of the country and then market the shit out of it. Get other traditional/online-only retailers to use Target for online fulfillment and then boom. To offset the investment in the fulfillment center, reduce store opening and remodel expenses in the short-term. Additionally, go on a firing spree and I'm sure you'll be able to manipulate the numbers to satisfy the $150 million profit increase. Could this happen in real life? Probably not as quickly as Target would like. But for a class project, you can be aggressive with your e-commerce growth figures.
As a reference, look up what Sears is doing with their fulfillment program as a guide.
it's just a project for a course... talk to your professor, you're having things way over your head. Make it simple and feasible. Just project a 5% 2~3yr CAGR and justify your assumptions on its growth drivers, industrial growth, macroeconomic standpoint, market strategy (might as well make a SWOT analysis).
The answer is so simple, just aquire another company for all stock! :)
Go read a consulting case book and it will layout in detail what the profit growth drivers are. You best bet is to create a store contribution model and suggest X number of new store openings.
If you want to increase profit by 5%: 1. Growth revenue by 5% (assuming margins are flat) 1A. Grow revenue by opening X new stores, assuming each store generates $XM revenue 1B. Grow revenue by adding X peripheral products / services to each store (e.g. more Starbucks, photo printing service, etc) 1C. Grow revenue by increasing prices
Increase advertising.
The easiest way to increase profits is selling assets.
Brick and Mortar stores are dog shit. Staples, the #2 online retailer has realized this shift, and they are acting accordingly by shutting down useless stores.
Brick and mortar stores aren't all dog shit...if they were then Lululemon wouldn't be pulling in more than $2K per square foot every year. JC Penney is dog shit; Target should be thriving in this kind of environment where overall consumer spending is up but poor people have less money to spend than rich people
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