What to watch in Target’s earnings report
Target (TGT) is scheduled to report results of its third fiscal quarter before the market open on Wednesday, November 15, with a conference call scheduled for 8:00 am EDT.
What to watch for:
1. COMPETITION WITH ONLINE RETAILERS
Retailers like Target have been hurt by an in online shopping on sites like Amazon (AMZN) rather than at brick-and-mortar stores. Analysts and investors will be listening for Target executives to comment on Amazon’s acquisition of Whole Foods.
Earlier this month, Reuters said Target and other retailers are using legal rights in real estate agreements to limit the initiatives of Amazon’s Whole Foods Market in malls, adding that the retailers have legal rights that enable them to limit Amazon’s Whole Foods activity near their location and bans on Amazon lockers and delivery operations near Target stores in Illinois and Florida have already been established. Morgan Stanley analyst Kimberly Greenberger told investors that her firm’s latest apparel survey lends support to her belief that Amazon is quickly gaining traction at the expense of department stores and certain specialty retailers.
Target Chairman and CEO Brian Cornell said that the retail environment is “crowded” and the environment will continue to be challenging.
Following better than expected second quarter results, Target forecast third quarter adjusted EPS of 75c-95c and said both Q3 and Q4 comp growth will be within the range the company experienced in Q1 and Q2. The company expects FY17 comp sales growth to be around flat, plus or minus 1%.
Target again raised its FY17 adjusted EPS view to $4.34-$4.54 from $3.80-$4.20.
3. HOLIDAY SEASON UPDATE
Target recently announced plans for the holiday season, including free shipping and gifts under $15.
The company is also allowing customers to receive their orders in several ways, including visiting one of its 1,800 stores, ordering online for delivery from Target.com, using Order Pickup or using Target Restock.
Last month Target said it planned to hire about 100,000 team members across the country for the upcoming holiday season, up from the 70,000 employees it hired last year, and said it would hire 4,500 team members at the company’s distribution and fulfillment centers to replenish products to stores and fulfill digital sales throughout the season. Earlier this month, Target announced its nationwide expansion on Google Express (GOOG, GOOGL), including voice- activated shopping, as well as the addition of Target REDcard as a payment option in 2018.
4. STORE REMODELS, CLOSURES
Target is expanding its plans to remodel supercenters and open smaller stores in cities. Target will remodel over 55% of its current stores by year end 2020.
CEO Brian Cornell said sales have increased 2%-4% at recently remodeled stores.
In addition to the 110 stores remodeled in 2017, Target plans to fully renovate more than 325 in 2018, 350 in 2019 and 325 in 2020.
CNBC said Target is planning to close about a dozen underperforming stores in Michigan, Florida, Illinois, and Texas, with those locations closing in February of 2018.
“We have a rigorous process in place to evaluate the performance of every store on an annual basis, closing or relocating underperforming locations as needed,” a spokesperson said, adding that “Typically, a store is closed as a result of seeing several years of decreasing profitability.”
TGT last traded at $59.78. The issue has a 52-weeks trading range of $48.56 – $79.33.
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