2 'Primary Drivers' Highlighted By Target Are Already Priced Into Stock

Though Target Corporation

said the recent controversy surround its bathroom policy didn't affect its sales, Barclays said the two comp drivers that the general merchandise retailer highlighted at its financial community meeting are already in priced in to the stock. At the meeting, Target outlined the primary drivers in 3 percent plus annual comps in 2017 and beyond. Two of the drivers are already in place, including the organization behind Signature category outperformance and the initiative to improve in stock levels. Future drivers of accelerating comps include accelerating performance in Food, Localization, Flex Formats, and the Loyalty program. On the Localization front, analyst Matthew McClintock said Target still needs to develop supply chain capabilities to provide a local assortment on a large scale and Loyalty program is the least developed of all the comp drivers. "Nearer term, the company's macroeconomic view is that the consumer is still consuming, but that they are uncertain why the overall business has decelerated," McClintock wrote in a note. The company noted that that it has experienced no measurable or material impact from recent controversy surround its bathroom policy. However, the company did experience a noticeable store traffic change post Easter (but pre bathroom controversy) that was not related to weather. McClintock said Target mentioned that it performed well during Easter weekend and took market share, driven by Apparel. In addition, Target plans to provide more pack size options and shift its circular strategy for a more balanced approach to highlighting its offering to encourage fill-up trips. "Target does not expect any impact from recent legislation changes to overtime rules," the analyst said. The company noted that labor inflation has existed for the last several years and that it "does not expect a step function up in incremental pressure." Shares of Target closed Thursday's regular trading session at $68.91. McClintock has an Underweight rating and $65 price target on the stock.