Why it's time to get out of Target stock

The huge retailer, seriously in trouble, seems to be getting desperate.

By Traders Reserve Jun 12, 2014 1:59PM

Credit: © Richard Levine/Alamy

Caption: A Target department store sign in New YorkBy Jamie Dlugosch

 

As I watch the demise of RadioShack (RSH), I wonder which company will be next to fail.

 

Could it be Target (TGT)?

 

The more I think about it, the more I think that might be the case. Scoff if you will, but the recent trends for the company are not good.

 

Now, we have further evidence of Target's desperation.

 

On Tuesday, Target unveiled the big changes it would be making in the wake of a security breech that seriously damaged the company's brand, in addition to harming as many as 70 million customers  affected by the theft of personal data.

 

But much of what Target announced was superfluous.

 

Corporate moves

The company is moving its executive group to one floor at company headquarters in hopes of slashing bureaucracy that perhaps had bogged down the retail chain.  And gone is the term executive committee. In its place is leadership change.

 

Good grief! If that's the best they can come up with . . .  Circuit City,  here we come!

 

As for substantive measures, Target named a new chief information security officer. In addition the company is expanding liquor sales, finally, to Target's home state of Minnesota.

 

Management might need the booze. They are now seriously in trouble.

 

No profit growth

Some are speculating that Target is simply playing musical chairs. For investors I sure hope not, but unfortunately I can't argue with that assessment.

 

Where will the growth come from? Canada was a disaster and the security breech might linger for longer than expected. The bigger problem for Target is that its big-box retail model has run into a brick wall with respect to profit growth.

 

Unlike Costco (COST), Target relies on volume at its stores, volume that is willing to pay a little bit more for the Target "mystique."

 

Hello! The idea of charging a bit more in the current environment is ludicrous and sure to fail. The middle-class squeeze is very much in the middle innings. Retailers selling to the high end and those selling to the low end are doing OK. Those in the middle, like Target, are struggling.

 

There was nothing in the pre-board meeting announcement to indicate that Target is doing anything to change that dynamic. I'd be selling this stock as fast as I possibly could.

 

In a world of Dollar Shave Club, Wal-Mart (WMT) and Costco, do we really need Target? It is not as strange of question as it might sound.

 

Just ask Circuit City and RadioShack shareholders.


More from Traders Reserve


6Comments
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I really hate to hear this!  I helped open many of their stores back in the late 90's when they arrived in my neck of the woods.  They, at least at that time, were a great company to work for, had great benefits, offered a wonderful training program, and the pay was well above the other retailers, again at that time.  I still prefer Target to Wal Mart, hands down!
Jun 12, 2014 11:47PM
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With Costco and Amazon around, it's hard for Target to compete.  Hate to see them shrink or go since they are based in my State.
Jun 12, 2014 10:17PM
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Yeah, left TGT about 18 months ago...
Jun 13, 2014 10:48AM
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The Stock, Maggie. The stock....Still shop there, but have never worked there...Okay place.
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