Do you like shopping at Target (NYSE: TGT)? Many people do. In fact, investors are hoping that so many people like buying things at the bullseye retailer that the company will beat earnings expectations for the third quarter. Target will be reporting on Monday, November 17. What should we expect?
Shareholders should expect a drop in the bottom line. Now, did we need a source to tell us this? Probably not. The consumer is starting to feel scared, there's no doubt about it. I'm sure everyone has anecdotal evidence concerning the fear that is out there. Consumers are afraid that the job cuts being reported in the papers will eventually reach their cubicle, so they're scaling back on spending. So, if Target merely meets the expectation for $0.49 per share next Monday, I'm sure many shareholders will breathe a sigh of relief, even though that will represent about a 12% drop in per-share profit.
I'm not so sure Target will beat, though. For one thing, Brent Archer recently reported on Target's lousy October sales data. They missed Wall Street's mark. Since Target beat the last two quarters; I figure we're due for a miss considering everything that's been going on. We shall see. I'll be interested to see how the margins are doing and what kind of position the company may be in going into Black Friday. And I'll be looking at the comps, of course.
Without a doubt, I would under no circumstances play around with Target's stock before earnings. Do I think it's a good long-term play? I do. If you've got the patience, do some due diligence on the company and see what you think about its brand equity and potential for growth. However, from a shorter-term perspective, I expect the earnings report will be gloomy, and I figure that whatever outlook is given will be conservative (again, this is probably stating the obvious). The stock was roughly a few bucks off the 52-week low at the close of trading on Wednesday. It really wouldn't be a stretch to think that the stock will fall through that low. For now, traders could look to catch bounces after the shares find support. Target competes with retailers like Wal-Mart (NYSE: WMT), Best Buy (NYSE: BBY), and Sears Holdings (NASDAQ: SHLD). It's going to be an interesting Christmas season...
Disclosure: I don't own any company mentioned; positions can change at any time.
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