Retail

Target's Serial Failures a Sign of Things to Come?

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Target Corp.’s (NYSE: TGT) board chair and chief executive, Brian Cornell, for some reason believes that because his company has opened a new store in New York’s Herald Square, and similar locations in 11 other cities, the fortunes of his other 1,800 stores and public corporation might be rescued. Target’s ongoing failure to effectively compete with Amazon, Costco and Wal-Mart Stores Inc. (NYSE: WMT) won’t be reversed at all because of the new plan.

Herald Square is the graveyard of Macy’s Inc. (NYSE: M), which has its flagship store there. So does faltering Gap and several other struggling retailers. The new Target store is a publicity stunt as much as anything else.

The store is one of Target’s new “small-format” stores. Cornell said:

As we open more small-format stores in new neighborhoods across the country, we’ll be even closer to our guests, and our reimagined stores will provide elevated inspiration and ease, along with serving as hyperlocal distribution centers to fulfill digital orders faster.

There is not an iota of evidence the new plan will work. Wall Street is certainly skeptical of Target’s future. Its shares are down 15% this year to $61. By contrast, Walmart’s are up 25% to $86, near its 52-week high.

The first knock on Target is that its results are roughly flat. In the most recent quarter, revenue rose 1.6% to $16.4 billion. Net income was down 1.2% to $672 million. Same-store sales were up 1.3%. The company expects the number to be about flat for the balance of the year, tough news for investors who hoped for a holiday rebound.

The other criticism of Target is that it has done so little in e-commerce. Walmart has scrambled to compete with a mix of M&A and cutting-edge efforts to improve in-store experiences. Without matching efforts, particularly in e-commerce, Target will move down the path Macy’s did, although not so quickly.

Herald Square is a place old retailers go to die.

 

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