If you head into a Target store anywhere, you are impressed by the vast, attractive and reasonably priced inventory and, except perhaps at the holidays, the relatively fast checkout process.
But investors can't help but ask why is Target's TGT stock such a disaster? And how does the stock get out of the rut?
Perhaps on Nov. 15 they will get a signal from the company that it has turned the corner and that the stock really has bottomed. The company is set to issue its third-quarter report before financial markets open.
The stock has fallen steadily since late 2021.
When the company shocked Wall Street in the summer of 2022 with a big miss on quarterly results, the shares dropped 25% in just one day.
As of Nov. 10, it was down 59% from an all-time high of $266.39 in November 2021. It fell 35.6% in 2022 alone and is down 27.3% in 2023 -- even after an 11% gain in the first quarter.
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The stock is up 5.2% since hitting an intraday low of 102.93 on Oct. 6 but is off 2.2% for November.
Maybe an analyst will probe the question of a turnaround during the company's Nov. 15 morning earnings call.
The short answer will be something like the company's earnings and operations are still a mess but starting to improve. The current earnings estimate is for $1.48 a share for the quarter that ended Oct. 31, down from $1.54 a year ago. Revenue is forecast at $25.3 billion, down 4.6% from a year earlier.
In its second-quarter earnings report, Target was projecting earnings of $1.20 to $1.60 a share and annual earnings of $7 to $8 a share for the year. Sales will be slipping "around a wide range in the mid-single digits" for the remainder of the year.
The misery of 2022 and 2013
The problems the company has faced have been enormous:
- The Covid-19 pandemic and the inflation surge that erupted after the pandemic eased.
- Too much inventory in 2022 and, worse, inventory customers didn't want. More than half the inventory in 2022 was in discretionary goods. Target customers appreciate the big inventory of staples: toothpaste, detergents, basic clothings, school supplies and the like. Then, they want the fancy stuff.
- Competition from the likes of Walmart WMT, Costco, and Amazon.com AMZN, Dollar Tree.
- Shrinkage of inventory due to theft, including organized theft.
- Poor performances of stores in specific sorts of locations.
Downtowns have been a particular problem. The company has been closing stores all year, including nine this fall in New York, San Francisco, Seattle and Portland.
In addition to all those issues, it is possible that Target and others got caught in the bullish vibrancy of the pre-pandemic economy and just expanded too quickly. Just as office developers did.
So, Target's earnings report and the conference call under CEO Brian Cornell have to show that the problems of the last two years are resolved -- or are about to be.
Target is not an outlier
Target has not been alone in its struggles in the last 18 months or so. Indeed, many of Target's problems are everyone else's, too.
Target and Walmart are both part of the Consumer Staples sector of the Standard & Poor's 500 Index. The sector is up 1.5% in November but down 6.5% for the year. The information technology sector, aka tech, is up 10% this month and up 47% for the year.
Walmart, which is also a component of the Dow Jones Industrial Average, released similar second-quarter results to Targets in the summer of 2022. The retailer will announce its third-quarter results on Thursday. Walmart shares fell 2% in 2022 but are up 17% this year.
Appliance-and-electronics retailer Best Buy BBY fell 21% in 2022 and are down 20.5% this year.
