Target's problems run deeper than Canada: Analyst
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Aug 12, 2014  |  Vote 0    0

Target's problems run deeper than Canada: Analyst

Are problems at Target Corp. bigger than the botched Canadian expansion?


Target’s problems run deeper than the 130 stores in Canada, according Janney Capital Markets analyst David Strasser.

His firm is more concerned with shrinking profit margins in the U.S., which has 1,795 stores and where new chief executive officer Brian Cornell took charge effective today.

Cornell replaces former CEO Gregg Steinhafel.

“Our contention is the retail environment, led by online retailers and WMT (Walmart), has structurally changed industry margin dynamics and Mr. Cornell will need to readjust TGT’s (Target’s) margin expectations to adapt to this new world,” according to a research note from issued Monday by Strasser and his associates at Janney.

Meanwhile, a trip to Canada to walk through stores with Target management left Strasser feeling better about Target’s future north of the border, despite problems with distribution and merchandising and the perception that Target stores in Canada haven’t been offering the same selection or prices available in U.S. stores.

“Our walk through the Canadian locations, showed improving stores, a steady flow of customers, and excessive markdowns on warm weather and Summer merchandise. However, BTS (back-to-school) looked strong, well merchandised and properly inventoried,” according to the research note.

Target Corp. is scheduled to report earnings next week.

On Tuesday, the company’s new Canadian president, Mark Schindele, outlined plans that include more unique merchandise, better prices, and more customer-friendly price-matching policies, aimed at getting more shoppers into stores.

Research recently conducted for the Toronto Star revealed that shoppers seem to be choosing Walmart over Target.

Last week, Target lowered its outlook for the second quarter, citing costs related to a data breach in the U.S. before Christmas, flat comparable store sales in U.S. stores, and softer-than-expected sales in Canada.

Toronto Star

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