Young and Dumb: Why This Top Brand (and Its Stock) Is on the Rise

by Jeannette Di Louie

Way back in 2009, Late Late Show host Craig Ferguson presented his opinion on why the world is such a mess.

With his trademark humor - and Scottish accent - he traced declining intellectual ability and deteriorating cultural tastes to marketing decisions made in the late 1950s and early 1960s. That was when advertisers realized they could "sell products to younger people because then they'll buy things their whole life."

Ferguson noted how that trend took off, causing society to turn "on its head," ultimately birthing today's form of consumerism, which is all about being "young and kinda stupid."

Amusing as his observations were, they're not wrong. With some exceptions, much of marketing today is driven by tweens and teens, college students and the cool, hip crowd that frequents bars and nightclubs with oftentimes detrimental abandon.

Think about the last commercial you saw for a car, skin product, beverage or tech gadget. More than likely, it didn't involve anybody over the age of 35, and even that's a stretch.

Like Ferguson, you might find that trend and its consequences exceptionally annoying, but you also have to acknowledge its significance. And its profitability.

We all have to live with the ridiculousness the "deification of youth" foisted on us. So why not make the most of it?

Goldman Sachs' Lindsay Drucker Mann recently speculated that "Over the next five years, millennials [anyone born between 1980 and 2000] are expected to ascend at the expense of boomers in apparel consumption, increasing spending by 20-25%." In expectation of that uptick, the financial institution compiled "the top 50 brands" destined to reap the benefits.

Unfortunately, many of those companies aren't publically listed. But spot No. 7 can be found on a major U.S. exchange.

And it is might surprise you...

Target: A Mecca of Fashion?

Target Corp. (NYSE: TGT) can hardly be called a "sexy" brand.

Yet it's still somehow drawing fashion-obsessed youth just as much as it appeals to their parents. According to joint research by Goldman Sachs and Teen Vogue, 96.4% of 1,200 specially selected "It Girls" know about the stores and 76.9% have a favorable opinion of them.

Maybe that's because Target recognizes the purse power those "young and kinda stupid" consumers hold. Focused on fitting a certain image, whatever that image may be, they're easily swayed by high fashion names and brands... like the ones that Target has been touting for the last several years.

Back in 2006, it began developing its "Target Couture" line, leading it to team up with high-end designers such as Jean Paul Gaultier and Alexander McQueen. Through those collaborations, Target was able to push posh clothing for reasonable prices.

The resulting products were a huge hit.

In the real world, names like Missoni might not mean much to many of us, but don't be so quick to discount them. When Target signed the upscale Italian stylist on for a 2011 run, there was such intense interest in buying his clothing that actually crashed from the strain.

Clearly, the company got fashion-driven young people's attention. And it's confident it can maintain that hold, even with its more recent switch from exclusive fashion to boutique sales.

Fashion Aside, Target's Growth Is Steady and Rising

It has to be noted once again that Target isn't sexy. And neither is its stock per se.

Over the last few years, revenue, gross profit and operating income have all positively progressed, though not by any exorbitant amounts. This is a strong, growing company, but don't expect its share price to quadruple anytime soon.

That's not to say its stock isn't on the rise, just that investors should consider it a long-term hold instead of a get-rich-quick scheme. Slow and steady, after all, still wins the race.

The business has paid a dividend since 1967, raising the payout 12 times since 2000. The most recent hike was last month, when it declared a quarterly dividend of $0.43 per common share, a yield of 2.7%.

Companies don't increase what they pay out to shareholders unless they're confident in both the short-term and long-term future.

For Target, the future hinges on a segment of the market that's gaining more strength and spending power buy the day. Millenials may be "young and kinda stupid," but someday soon, they'll be the economy's biggest spenders. As a top brand, Target is in a good position to take advantage of the trend.

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