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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (801)	9/18/2003 8:17:52 AM
From: russwinter	Read Replies (4) \| Respond to of 110194

I was working on TGT's 10-Q yesterday, and this is a clearer example of how these outfits generate business through aggressive finance. biz.yahoo.com Here's some numbers (8/2/03 figures): TGT has total annual sales of 44b, up 8.4% YOY. However same store sales through 8/2 (proceeding six month to six month are only up 0.7%). Over the last month and a half it appears TGT received a little boost from the tax refund as same store has increased some. TGT has driven their increases (if 0.7% can be called an increase, treading water I'd say) by ballooning receivables (24% YOY) on their proprietary and Target Visa card. Rec. now constitute 13% (5.754b) of total annual sales versus 11 1/4% last year. TGT has written off 249m in bad debt in the six months, compared to 121m prior year. Almost all the gain is from Target Visa: 169m vs 38m. That's 8.9% of Visa rec. Since proprietary is relatively stable, I would think this would suggest that Target is driving sales growth on the backs of marginal customers (creditwise) and expensive new store expansion (spends over 3 billion annualized on capex) in already saturated markets (the malallocation of capital situation we discuss here all the time). No doubt this is the pattern with homebuilders and auto companies as well. Subprime seems to be really pushed, and it doesn't appear much attention is being given to how these companies are now driving sales. Apparently there is a wild dice roll going on, that the US consumer is going to magically clean up his balance sheet. Since it's not with jobs and income growth, it must be asset (bubble/new cheaper credit) driven? Finally, TGT now as an allowance of 7.1% for the period end rec. That's suspect given that write offs have been 8.7% (combined) for the prior six months. Further past dues (liberally defined as THREE or more payments) has increased from 3.7% to 4.0%. Very risky business model and benign accounting for it.