Wednesday, March 1, 2017

No AFA did not sink Target Stores

English: Logo of Target, US-based retail chain
American Family Association's silly boycott of Target was probably irrelevant to the earnings miss that Target reported for the fourth quarter. It is abundantly clear that Amazon and other online sellers took a big bite out of Target and most brick and mortar stores.

In point of fact, Target missed revenues by just 0.2%. Year over year revenues declined as expected because Target sold its pharmacies to CVS. This was partially offset by an increase in online sales by an impressive 38% which is not a sufficient percentage of total sales to compensate.

Target was late in converting to digital and had some missteps. However, that has nothing to do with a bunch of religious yahoos claiming to boycott the operation. I have not seen traffic metrics but Target tends to be concentrated on the East Coast and Midwest plus California. The lowest density is in the Bible Belt. Anyway, I have the suspicion that AFA's constituency are more inclined to be the Walmart set.

The big problem with Target was that gross margins declined from 27.8% to 26.9% causing them to miss earnings estimates by $.06/share. It would appear that they had to put more items on sale to compete. It looks like the market over-reacted. I do not follow the stock so that is not a buy recommendation.

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