A disappointing holiday season and tougher sales comparisons ahead were enough to prompt an analyst downgrade of Target Corp on Wednesday (Jan. 2).
Target shares tumbled to $58.82, down 35 cents, while the broader markets rallied to start 2013. In the past two weeks Target shares have shed nearly 6% of their market value.
Jeffries’ analyst Daniel Binder slashed his expectations for the mass retailer from a $74 per share price target to $59. He also sees the stock as a “hold” position in 2013, stepping back from his previous “buy” recommendation.
Binder’s note to investors was published a day ahead of the December retail sales report on Thursday (Jan. 3).
Target forecast a low single-digit increase in its December same-store sales, but Binder expects flat sales up to 1% on the high side. Binder wasn’t the only analyst heeding caution as J.P Morgan also reduced the firm's forecast by 2%, leaving Target a dismal 0.5% gain.
Analysts say the holiday shopping season can account for up to 40% of a retailer’s annual revenue.
In part, Binder blames the lackluster December sales on a consumer shift away from in-store toy purchases saying Target did not stock enough inventory, which prompted customers to shop elsewhere online.
Binder also believes the holiday partnership with Neiman Marcus likely disappointed both parties given they have had to deeply discount the designer merchandise they hoped would drive both traffic and sales.
Same-store sales among 17 chains are expected to rise 3.7% in December, this is down from 4.2% growth in December 2011, according to Thomson Reuters independent survey.
Wal-Mart and Amazon are not among the 17 retail chains reporting monthly sales. Target announced in October it would also stop reporting monthly sales in 2013. The retailer’s fiscal year ends Jan. 31.