Stock of the day 20/11/2014 – Target Corp

In the battle of the bargain retail giants, Target landed a surprising blow against Walmart, with their announcement yesterday of an increase in profits in the third quarter.

Whilst Walmart posted a 0.5% growth in comparable store sales in Q3, Target leap-frogged them as they announced a 1.2% growth in the same arena. This occurred in new CEO Brian C. Cornell’s first quarter since his appointment on July 31st 2014, who no doubt will be ecstatic over Target’s reversal of fortunes. Profits rose 3.1% to $352 million, whilst the recent expansion into Canada saw a 43.8% growth in sales when compared to this time last year. Target has attributed a lot of this third quarter success to the back-to-school sales period, alongside a strong Halloween, two fecund periods for the company.

This success is in stark contrast to where Target was just shy of a year ago, when a data breach around Christmas 2013 saw 40 million Target customers have their information stolen. The lack of trust surrounding the company following this PR disaster saw stock prices fall from 6305.5 in January to 5467 in February. Target struggled to recover from this as the year went on, with share prices remaining low. However, prices grew by nearly 4% to 6414.5 on November 7th, and as it grew closer to the Q3 earnings release, this positive sentiment remained around the company, as it reached 6812.5 last week. After the earnings were revealed yesterday, shares jumped 7.4% to hit 7251 by Wednesday close. This was the first time Target Corp had broken through the 7000 mark since August 2013, and only slightly less than its 10 year high of 7341.5 in July 2013.

As Target enters the fourth quarter, the biggest shopping period of the year is on the horizon, as well as worries about their north-North American venture. Despite sales rising 43.8%, Target is still making a pre-tax loss of $211 million in Canada, and will have to do a lot of work to plug this leak. However, Target will remain hopeful for the fourth quarter, as next week sees Thanksgiving, which of course now comes twinned with Black Friday. Target will face fierce competition over this period from Walmart and Amazon, as the former desperately attempts to lure shoppers away from the online retail behemoth. Following Black Friday is the Christmas rush; Target will be hoping they get a better gift from Santa this year than the data-breach-disaster of 2013.