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Target 'Drops A Grenade,' Lowers Guidance Yet Again

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While Target (NYSE: TGT) reported in line earnings at $0.79 per share and revenues that exceeded estimates, it was the new cut in its full-year EPS guidance to $3.10 to $3.30 from $3.60 to $3.90 that has the stock trading down.

Analyst Brian Sozzi of Belus Capital Advisors commented Wednesday morning on the lowered guidance:

"Target just dropped an epic full year earnings warning onto the heads of its remaining shareholders. Oddly enough, the magnitude of the warning was highly anticipated by the market following the harsh outlook adjustment offered on August 5. And yes, Target now joins Walmart as a major discounter issuing a material earnings warning as back to school is underway and before the start of the holiday season."

Here are a few things Sozzi highlighted:

  • July comp of +1% hints that the core of the business remains soft; remember the last week of July has been strong for retailers due to back to school buying.
  • Target's domestic traffic has been negative for nine quarters in a row.
  • The company is giving away profit margin yet not driving traffic increases or units per transaction gains.

In the note, he goes on to say "However, buyer beware. Target has given investors ZERO reason to be encouraged that a global turnaround is secretly emerging."

Sozzi has a Sell Rating on Target. Shares are down about one percent just after the opening bell.

Latest Ratings for TGT

DateFirmActionFromTo
Dec 2014Wolfe ResearchInitiates Coverage onOutperform
Dec 2014Cowen & CompanyInitiates Coverage onOutperform
Nov 2014Morgan StanleyMaintainsUnderweight

View More Analyst Ratings for TGT
View the Latest Analyst Ratings

Posted-In: Belus Capital Advisors Brian SozziAnalyst Color Earnings News Analyst Ratings

 

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