Target stock prices goes in shitter on bad sales report.
You remember, right? Target came out saying it’s OK for men to go into women’s bathrooms.
The internals were just as messy, with Target reporting comp sales of -1.5%, missing the -1.3% estimate, on gross margin of 26.9%
But the most troubling part of the release was the company’s disappointing guidance: Target now sees 1Q adj. EPS of 80c to $1.00, far below the consensus estimate $1.33, and also over 20% below the lowest firecast (range $1.26-$1.41). The bleeding is expected to continue on the back of a “Low-to-Mid Single Digit Decline” in comp store sales in both Q1 and the full year. Also, for the full year, Target sees adj. EPS of $3.80 to $4.20, wildly missing consensus of $5.34 (range $5.05-$5.60).
CEO Brian Cornell was rather downbeat: “Our fourth quarter results reflect the impact of rapidly-changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores. At our meeting with the financial community this morning, we will provide detail on the meaningful investments we’re making in our business and financial model which will position Target for long-term, sustainable growth in this new era in retail. We will accelerate our investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years. In addition, we will invest in lower gross margins to ensure we are clearly and competitively priced every day.”
Cornell concluded that while he is confident the proposed changes will best-position Target for continued success over the long term “the transition to this new model will present headwinds to our sales and profit performance in the short term.”
In other words, expect more of the same from America’s biggest retailers who are now stuck in a fight for market share, even as prices continue to decline, forcing CFOs to come up with increasingly more innovative ways of preserving margins and profits.
At last check, TGT was trading 12% lower after the earnings, wiping out $4 billion in market cap and weighing in on peers such as Walmart.