This year has been rough on a great many retailers. Over 7,000 stores in the US are slated to be shut down this year, which is more than all the stores closed down in 2018. In fact, we’re well on our way to the greatest number of annual closings ever.
A lot of this is thanks to the pressure Amazon inevitably forced on retailers across the country. With Amazon commanding so much attention and money from a huge part of everyone’s customer base, they’ve played a huge role in the retail apocalypse. However, some retailers managed to escape certain doom, one of them being Target. Target’s roughly 1800 stores have survived the retail apocalypse, and they’ve risen to the plate in regards to online provisions. They’ve even benefited from the crippling blow to a lot of their competitors.
In order to keep up with Amazon, Target spent the last few years spending the necessary funds to optimize their online component and keep prices down. Now that it has finally accomplished that task, its earnings are finally starting to look up again.
Goldman Sachs analyst Kate McShane wrote in a client note that “Target has finally reached that turning point in their earnings trajectory they have been working towards for the last three years.” Sachs also believes that Target’s stocks can rise from its recent value of $88 to $102. However, while stocks are up 33% this year, it’s worth noting they were flat for the four years before that. This kind of valuation implies that Target’s stocks haven’t reached their full potential just yet.
Target’s emphasis of online sales has helped it greatly in advancing beyond other stores that failed to do the same. Its online sales accrued $5 billion last year. In 2012 that number was only $1 billion, so its obvious just how much things have changed.
Bill Smead of Smead Capital Management bought into Target back in 2017, when it only traded $52 in stocks, and investors were shying away thanks to the heavy pressure of Amazon. He now believes that the stock will soon be worth $124, with the expectation that Target’s earnings will steadily grow by 10% a year. So far things seem to be going that way, as Target has already posted 16% earnings per share growth in the first quarter this year.
Target has been showing rapid growth due to their investment in online retail, and the closure of stores such as Toys R’ Us have greatly benefited their bottom line, due to competition simply going down the drain. With further plans to optimize both their stores and their online options, Target is almost sure to keep growing in terms of good finance; making it clear to all that a good investment now could result in a lot of profit later.
