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Target (TGT) Down 24% in 3 Months: What's Hurting the Stock?
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Are you still holding shares of Target Corporation (TGT - Free Report) and waiting for a miracle to take the stock higher in the near term? If yes, then you might lose more money as chances are very slim that the stock, which lost its value by 23.9% in the past three months, will take a U-turn in the near term. Moreover, in the same time, the Zacks categorized Retail-Discount & Variety industry declined only 2.4%. Let’s delve deeper and try to find out what is taking this Zacks Rank #5 (Strong Sell) company down the hill.
Sales Decline a Major Concern
Ever since Target reported fourth-quarter fiscal 2016 results on Feb 28, the company’s shares have declined 20.2%, underperforming the industry, which has decreased 6.5%. Persistent decline in sales have raised investors’ apprehensions. In the fiscal fourth quarter, the company not only missed the Zacks Consensus Estimate, but also witnessed a year-over-year decline in sales. We note that total sales decreased 4.3%, following declines of 6.7%, 7.2% and 5.4% witnessed in the third, second and first quarters of fiscal 2016, respectively. The sale of the pharmacy and clinic businesses to CVS Health, stiff competition and sluggish traffic affected the top line.
Dismal Outlook
After three straight quarters of earnings beat, Target succumbed to a negative earnings surprise of 3.3% in the fiscal fourth quarter. The dismal performance compelled management to provide a bleak outlook for fiscal 2017. During first-quarter fiscal 2017, management expects a low-to-mid single digit decline in comparable sales and projects adjusted earnings in the range of 80 cents to $1.00 per share, down from $1.29 recorded in first-quarter fiscal 2016. For fiscal 2017, Target forecasts a low-single digit decline in comparable sales and envisions adjusted earnings in the band of $3.80–$4.20 per share, down from $5.01 posted in fiscal 2016.
Challenging Retail Industry
The retail landscape, which has been undergoing a fundamental change for the past few years, with technology leaving a deep and lasting impact on the space, is also putting pressure on Target. Today, online shopping dominates the minds of consumers. This shift in buying behavior has forced retailers to come up with new ways to market their products. This makes change the need of the hour, and retailers and manufacturers, who have responded quickly to it by staying technologically ahead, stand in good stead. Decline in brick-and-mortar sales has been a cause of worry for most of the retailers.
Target has undertaken several strategic initiatives to boost performance. The company intends to deploy resources to significantly develop its online platform and store facilities, in order to make shopping more convenient for customers. Moreover, with customers shifting rapidly to online, it was becoming increasingly important for Target to develop sturdy omni-channel facilities to remain in the business. The company plans to expand its merchandise assortments with special emphasis on Style, Baby, Kids, and Wellness categories.
Burlington Store delivered an average positive earnings surprise of 26.3% in the trailing four quarters and has a long-term earnings growth rate of 15.9%.
Children's Place delivered an average positive earnings surprise of 39% in the trailing four quarters and has a long-term earnings growth rate of 8%.
Best Buy delivered an average positive earnings surprise of 27.7% in the trailing four quarters and has a long-term earnings growth rate of 10.5%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>
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Target (TGT) Down 24% in 3 Months: What's Hurting the Stock?
Are you still holding shares of Target Corporation (TGT - Free Report) and waiting for a miracle to take the stock higher in the near term? If yes, then you might lose more money as chances are very slim that the stock, which lost its value by 23.9% in the past three months, will take a U-turn in the near term. Moreover, in the same time, the Zacks categorized Retail-Discount & Variety industry declined only 2.4%. Let’s delve deeper and try to find out what is taking this Zacks Rank #5 (Strong Sell) company down the hill.
Sales Decline a Major Concern
Ever since Target reported fourth-quarter fiscal 2016 results on Feb 28, the company’s shares have declined 20.2%, underperforming the industry, which has decreased 6.5%. Persistent decline in sales have raised investors’ apprehensions. In the fiscal fourth quarter, the company not only missed the Zacks Consensus Estimate, but also witnessed a year-over-year decline in sales. We note that total sales decreased 4.3%, following declines of 6.7%, 7.2% and 5.4% witnessed in the third, second and first quarters of fiscal 2016, respectively. The sale of the pharmacy and clinic businesses to CVS Health, stiff competition and sluggish traffic affected the top line.
Dismal Outlook
After three straight quarters of earnings beat, Target succumbed to a negative earnings surprise of 3.3% in the fiscal fourth quarter. The dismal performance compelled management to provide a bleak outlook for fiscal 2017. During first-quarter fiscal 2017, management expects a low-to-mid single digit decline in comparable sales and projects adjusted earnings in the range of 80 cents to $1.00 per share, down from $1.29 recorded in first-quarter fiscal 2016. For fiscal 2017, Target forecasts a low-single digit decline in comparable sales and envisions adjusted earnings in the band of $3.80–$4.20 per share, down from $5.01 posted in fiscal 2016.
Challenging Retail Industry
The retail landscape, which has been undergoing a fundamental change for the past few years, with technology leaving a deep and lasting impact on the space, is also putting pressure on Target. Today, online shopping dominates the minds of consumers. This shift in buying behavior has forced retailers to come up with new ways to market their products. This makes change the need of the hour, and retailers and manufacturers, who have responded quickly to it by staying technologically ahead, stand in good stead. Decline in brick-and-mortar sales has been a cause of worry for most of the retailers.
Target has undertaken several strategic initiatives to boost performance. The company intends to deploy resources to significantly develop its online platform and store facilities, in order to make shopping more convenient for customers. Moreover, with customers shifting rapidly to online, it was becoming increasingly important for Target to develop sturdy omni-channel facilities to remain in the business. The company plans to expand its merchandise assortments with special emphasis on Style, Baby, Kids, and Wellness categories.
Stocks to Consider
Better-ranked stocks in the retail sector that warrant a look include Burlington Stores, Inc. (BURL - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and Best Buy Co., Inc. (BBY - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Burlington Store delivered an average positive earnings surprise of 26.3% in the trailing four quarters and has a long-term earnings growth rate of 15.9%.
Children's Place delivered an average positive earnings surprise of 39% in the trailing four quarters and has a long-term earnings growth rate of 8%.
Best Buy delivered an average positive earnings surprise of 27.7% in the trailing four quarters and has a long-term earnings growth rate of 10.5%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>