Target’s Trouble Gets Worse

24/7 Insights

• Target Corp. (NYSE: TGT) reported abysmal financial results after Walmart Inc. (NYSE: WMT) posted excellent ones.
• One analyst has an idea about why Target’s financial performance continues to be so poor.

Target Corp. (NYSE: TGT), the second-largest big-box retailer in the country after Walmart, posted abysmal financial results after Walmart Inc. (NYSE: WMT) posted excellent ones. The news drove its stock down almost 10%. Its share price is down 1% this year, while the S&P 500 is 12% higher. Walmart’s stock is up 24% since the start of the year and recently hit an all-time high.

The company also offered an earnings forecast that was short of expectations, another reason for the sell-off.

There was speculation about why Target’s financial performance continues to be poor. Storch Advisors CEO Jerry Storch told Yahoo! Finance, “Target years ago … made a strategic blunder to basically pull out of the full-service grocery business.” Walmart has the largest grocery business in America. There is a theory that people who shop for groceries at Walmart also often buy other merchandise.

Target’s most recent quarterly financials showed that comparable store sales dropped 3.7%, earnings declined from $2.06 per share to $2.04, and revenue was down 3.2% to $24.1 billion. Management said it hoped to do better.

Walmart’s U.S. comparable store sales rose 3.8% in the most recent quarter. U.S. revenue rose 4.6% to $108.7 billion, while operating income for the unit gained 7% to $5.2 billion.

Nothing Target management said gave investors any comfort.

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