Store Traffic At Target Continues To Be A Problem

Target Corporation TGT witnessed a worse-than-expected deceleration in its Q2 comps, driven by fewer transactions as well as lower units per transactions. The company’s store traffic would likely continue to be challenging, Argus’s Christopher Graja said in a report. He maintained a Hold rating on Target, while reducing earnings estimates.

Target reported a 1.1 percent decline in its Q2 comps, worse than the Street’s estimate of a 0.7 percent decline. The number of transactions was down 2.2 percent, while units per transaction declined by 1.5 percent.

Estimates Lowered

Analyst Graja reduced the EPS estimates for Q3, Q4 and FY17 from $0.99 to $0.88, from $1.73 to $1.61 and from $5.15 to $5.00, respectively.

“The primary driver of these reductions is a more cautious sales outlook as store traffic continues to be a problem. Additional issues are price deflation in the food department, very weak sales of electronics and the need to drive business in the health/over-the-counter department,” Graja elaborated.

Improvements Likely Ahead

Management is focusing on improving Target’s merchandise and ecommerce capabilities. The analyst expects the company’s business to improve going ahead. He recommended looking out for “more exciting merchandise in higher-margin discretionary categories’ as well as core customers having the interest and discretionary income to purchase this merchandise at Target.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!