After Target (TGT) posted quarter results on Wednesday, the stock dropped by 21.97%. ETF investors who hold the SPDR Staples Select, VanEcK Retail (RTH), or Invesco S&P 500 Equal Weight Consumers Staples (RSPS) have a meaningful exposure to TGT stock.
Target reported a 1.1% Y/Y increase in revenue in Q3. For Q4, it expects to report flat comparable sales. Inflation and a deteriorating disposable income are not the reasons for this retailer’s poor performance. Walmart (WMT) reported strong results. Unfortunately, the firm will need to re-visit its company values. It needs a culture that resonates with its customer base instead of alienating it.
Target mismanaged its inventory again in the quarter. To lower it, the firm will need to sell products at a discount, cutting its profitability.
Target stock has a high risk of falling below $100. It will likely lose market share to Walmart, Costco (COST), and Amazon (AMZN) in 2025. Investors should consider holding those firms instead.
Dollar General (DG) and Dollar Tree (DLTR) both fell in sympathy for Target’s poor quarter. At or near fresh 52-week lows, markets expect these discount retailers to underperform. Neither company has a compelling business strategy that will reverse their weakening performance.
Other retail firms to watch today include Best Buy (BBY), Kohl’s (KSS), and Five Below (FIVE).