Target Stock Just Plunged. Is it Still a Smart Buy?
Target (NYSE: TGT) stock got hammered on Wednesday. The big-box retailer badly missed earnings expectations for its fiscal third quarter as demand weakened for discretionary products and it was forced to mark down prices in its effort to clear its excess inventory. The stock finished the trading session down 13%.
While its revenue rose 3% -- in line with estimates -- Target's adjusted earnings per share plunged from $3.03 in the year-ago quarter to $1.54 this time, well short of analysts' consensus estimate of $2.13. Gross margin fell by 330 basis points to 24.7% as the company said it's also struggling with theft. On the earnings call, CFO Michael Fiddelke said that theft -- or "shrinkage," as it's known in the industry -- was expected to wipe out $600 million in profit for the company this year.
For the period, which ended Oct. 29, selling, general, and administrative costs also rose faster than sales due in part to higher wages and increased costs for benefits. As a result, Target's operating margin in the quarter was halved from 7.8% in the prior-year period to 3.9%.
Source Fool.com
