It may appear that a comparison of retailer Target Corp. (NYSE: TGT) to smaller companies in the sector is ridiculous, because they include crippled Bed Bath & Beyond and faltering consumer electronics brick-and-mortar operation Best Buy. However, Target is so large and has such a sophisticated operation that it should do much better than these third-tier companies. It has not.
Target has just announced its most recent quarterly figures. Staggeringly, comparable store sales rose only 2.6% year over year. The gain was 8.9% in the same quarter of last year. The latest figure was well below expectations.
Total revenue rose 3.3% to $25.7 billion. Net income plunged 90% to $183 million. Essentially, Target did not make any money at all. Target management said revenue growth for its fiscal year would be in the “low to mid-single digit range,” which was another shocking disappointment.
Brian Cornell, board chair and chief executive officer, who is fortunate to still have his job, commented, “I’m really pleased with the underlying performance of our business, which continues to grow traffic and sales while delivering broad-based unit-share gains in a very challenging environment.” He must have been looking at a set of numbers different from the ones the company posted. Another quarter that underperforms badly again may cost him his job.
Much of Target’s problem is that it botched inventory management. This has led it to cut prices to clear out items it should not have ordered.
Target’s chance to redeem itself will be based on holiday season sales. This means a strong performance for November and December. If it struggles to show even modest progress, Cornell and his management team need to worry about their futures.
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