The holiday season was a tough one for retailer Target, with the company reporting transaction growth was flat year over year, hurt by sales in the electronics and entertainment categories, which saw high single-digit declines.
According to a report, at the same time transaction growth was flat, online transactions increased more than 30 percent. The higher mix of lower-margin growth from its online business was enough to result in a decline in fourth quarter margins and EPS.
“Despite these challenges, we are positioned to deliver full-year adjusted EPS of $5.00 or more in 2016, which would mark an all-time high for Target,” Target CEO Brian Cornell said, according to the report. News of Target’s poor showing during the holiday season prompted a selloff in shares Wednesday (Jan. 18), but not every Wall Street analyst is running for the hills or swapping an investment in Target for, say, Amazon, which killed it during the holidays.
Buckingham Research said the firm is maintaining its buy rating on shares of Target, although it’s slashing its price target to $77 from $85. “We are taking a much more conservative view on future results and now believe it’s reasonable to start with the assumption that TGT may never generate a positive annual comp again, or at least not before the eCommerce channel matures,” wrote the Wall Street firm. “In this admittedly dire scenario, we still see value in TGT shares, notably the company’s ownership of nearly all its real estate (we estimate this is worth more than the equity value) and robust FCF (averaging ~$5.50/share going forward), which the company returns to investors via dividends or share repurchase.”
Earlier on Wednesday, Target warned that sales were softer than expected in November and December and that sales at Target stores open at least a year fell more than 3 percent during the two-month period compared to the same timeframe a year earlier.