Anyone have strong opinions one way or the other on whether Target is going the right direction here? I work about 600 feet from their headquarters and there were quite a few box toting, teary-eyed people milling about yesterday as they axed 1700. I own some shares of Target, I shop there a ton, i have a number of friends employed there, so i’m definitely interested in their long term success, but I’m a bit troubled by this mornings news, chiefly this:
At a meeting with big investors and investment analysts in New York last week, Target executives surprised the audience with the size of the stock buybacks they plan: $2 billion this year and $3 billion each of the next four years. For next year, that means Target will spend more on buybacks than analysts think it will make in net profit.
Target is trading right near their 52 week high, they seem to be somewhat rudderless from a strategy standpoint, and yet, they’re initiaiting buybacks at their highest valuation in years(ever?)
I see paralles to Circuit City a decade ago:
Failed Canadian venture- check
Massive layoffs of experienced employees- check
Being eaten alive by their chief competitor- check
Spun off their credit card arm- check
Buying back shares at the top of the market- check
Am I way off base here, or is Target perhaps in some trouble over the next 1-3 years?
i can’t understand the direction. they are getting squeezed in the U.S., they utterly fail in Canada, and they think they can be wildly successful elsehwere? seems like wishful thinking. maybe they’ll be okay in the U.S. if and when sears and jc penney finally go down?
In Canada, retail is weird right now. Target failing, Sears failing (basically 1 or 2 of 4 anchor stores in every mall in the country), Mexx bailing (one in every mall), Jacob dying (one in every mall), Smart Set shuttering (one in every mall). Basically half of the female clothing stores closed in 2014 or are closing down in 2015. Not sure what will replace them aside from some bodega.
I don’t know that we are, I was speaking specifically to their valuation being at an all-time high. It certainly could go up, but I would argue that buying back shares at or near your all-time high’s is a bad idea in general. I’m not particularly bullish or bearish at this point.
It’s absolutely Wal-Mart. Target likes to pretend they’re far more upscale than they actually are. The sell cheap, disposbale crap to the near poor, poor and very poor alike. That certain segments of the population feel they are too good for Wal-Mart and therefore shop at Target doesn’t really change the calculus for me. If 80% of what you sell is identical, you’re in direct competition.
Yes. We’re talking about a company choosing to buy back their own equity, so the markets opinion of that equity seems to be the relative metric to me. Regardless if I believe it’s a fantastic value or a poor value, the market feels like it’s as valuable(unadjusted for inflation, obviously) as it has ever been.
when companies buy back, they increase share price. they make metrics look nicer. to me this is the most positive thing a company can do. cuz if company is good, then you have higher exposure, if a company has crap future, then sell as they buy, the ppl who dont follow the market wont sell, so you get the best price, while the ppl who held on are left with a greater exposure to a bleaker outlook…
laying ppl off is a toss up. it can imply that business is slowing. but it can also represent smart management that is being financially astute, such as after PE takeovers, when they want to make it leaner and meaner so they can sell it to leveraged buyout co.
I don’t diagree that their primary competitor is WalMart but target’s offerings span the range. Toys, furniture, bed & bath items are Wal-Mart quality; Clothes are low-end dept store (JC Penney or Kohls) quality, groceries are middle of the road quality (Vons or Albertson’s, much better than Wal-Mart) and priced accordingly. I don’t know if the store names mean anything to our Northern neighbors, but bottom line, TGT merchandise is a mixed bag unlike uniformly low-quality WMT.
I love shopping at retail stores that are slowly dying - you can find some real bargains, and for a good reason - they are still desperate to attract customers. Obviously buying an extended warranty on anything is out of the question - and it rarely pays anyway. But I am OK buying Sony electronics from Sears (respective mottos - “we are engineers not interested in profits” and “we are a pop-up store on Eddie Lampert’s real estate”) or garden stuff from K-Mart.
In Canada, TGT offered higher quality clothing but otherwise their wares were identical in quality to WMT and they lacked fresh grocery. unless you were buying clothes, it was like walking into Best Buy, which now sells non-electronic goods in Canada. I can’t speak for Target’s U.S. stores, but they offered absolutely nothing unique in Canada, especially considering they had to compete with Joe Fresh when it came to clothing.
Perhaps because I’m in Target’s back yard we get bigger stores and better variety, but specific to Minneapolis/St. Paul, this is false. Target and Wal-Mart offer 90+% identical wares in every category.
Targay should have focused more strongly on selling retail goods, protecting their IT, and correctly extending their footprint instead of pandering to the f@gs and supporting other social political issues!