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Target Corporation (TGT - Analyst Report) announced its year-round price matching policy with the aim of offering its patrons the facility to match the prices being offered by online retail giants.

The operator of general merchandise and food discount stores in the United States, will match prices with Amazon.com Inc.’s (AMZN - Analyst Report) Amazon.com, Wal-Mart Stores Inc.’s (WMT - Analyst Report) Walmart.com, Best Buy Co. Inc.’s (BBY - Analyst Report) BestBuy.com, and Toysrus.com.

The move comes at a time when most of the brick-and-mortar retailers are facing significant challenges from online retailers. Moreover, consumers now compare the price of an item offered by various companies through smartphones and tablets, and thereafter make the purchase decision at the best available price.

As a result, while online shopping is rising sharply, traditional retailers are losing millions. The changing environment prompted retailers to develop new sales strategies, with prime focus on combating online retailers.

According to Target’s price matching policy, the customer will not find any discrepancy in the price of an item bought either online or at Target stores.

However, if the consumer finds the price of the same item to be less in the circular issued by Target in the following week, when the purchase was made or within a span of 7 days on Target.com or on Amazon.com, Walmart.com, Bestbuy.com or Toysrus.com or in the printed advertisement of a local competitor, the company will provide the item at that price.

Target believes that its price matching policy coupled with REDcard reward program would provide it an edge over its competitors. However, we observe that the price matching strategy, which was introduced in the holiday season, did not fetch the desired results. The company’s December comparable-store sales numbers came in flat that fell short of management’s expectation of a low-single digit increase, although it showed a marginal improvement over a 1% decline in comps witnessed in November 2012,

Going forward, the company expects its fourth quarter earnings to meet or exceed the lower end of its earlier announced guidance range of $1.64 – $1.74 per share. The current Zacks Consensus Estimate stands at $1.48 per share for the fourth quarter. Moreover, the company expects low single-digit increase in its January comps.

Currently, we prefer to have a long-term ‘Neutral’ recommendation on the stock. Moreover, Target holds a Zacks Rank #3, which translates into a short-term ‘Hold’ rating.

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