Losing Patience with Target as Its Slide Continues

I am hoping Target (TGT) shareholders are getting sick of the current strategy by management of sitting back and doing nothing, because those are the results operations are getting.

Here are the latest retail figures:

Here is my problem. Wal-Mart (WMT) has gone back to its "low price" message with consumers and clearly it has worked. They cut back expansion plans and plowed that money into improving existing locations. Sears Holdings (SHLD) is currently in a big push for its appliance sales and internet and both are working. Target, has gone... well, fetal.

Now, the environment out there is clearly very tough, of that there is no doubt. But Target has gone from outperforming Wal-Mart to getting lapped by it. It is one thing to have sales sliding and to be taking steps to stop or reverse it and it is another entirely to do nothing about it.

Curling up in a ball and "waiting for economic conditions to improve" is not a strategy. We may not see actual economic growth until late 2010-2011. Are shareholders prepared to wait until then? Is the theory that people will just return to Target when things get better? Is it a case of current (and becoming entrenched) shopping patterns being reversed without any effort on management's part?

Recessions are where management shows best, as they use it as an opportunity to expand market share and entrench their brand with the consumer. Now, Target COULD do those things if they freed up some more cash. IF they choose to put even some of Bill Ackman's ideas to work, that cash would be there.

If I had wrote here last year that at this time next year there would be more positive news coming out of Sears than Target people would have said I was insane, yet that is precisely what is happening now.

Target shareholders are lucky in that they have a real viable option to them other than selling shares. They can elect Ackman's slate of nominees to the Board and start to see some changes at Target, or, they can do what management is and do nothing... and get nothing.


Disclosure: Long SHLD, WMT

Comments

[jala:]

I own a substantial position in Target . . . actual shares, not options. And I have a significant unrealized capital gain in those shares! Further, I would like to continue to own them for the next 8 - 10 years because Target has true value for an investor -- a long-term perspective. If the speculators out there take your advice and buy up shares to trade in a few months after raping the company's assets that long-term perspective will be lost. Bill Ackman is NOT an investor. And I damned sure don't want him and his ilk running any company that I invest in.

You may want to check some of your "facts" about who is doing what. SHLD is a shell of its former self and you see success?

Apr 11 05:15 PM

[jerico:]

Target has to decide to try to seriously compete with Wal-Mart, or if it is going to take share from more up-scale firms. It would be a mistake to try to out discount Wal-Mart. They would be better off going for "better" goods, not cheaper goods.

Perhaps they should merge with Whole Foods and go for the higher income crowd.

If they try to match Wal-Mart, they are bear hunting with a stick.

Apr 11 06:32 PM

[profretail:]

Jerico is on to something....but Target needs to get their price points under control and offer real value to go after this customer who is more sophisticated. So far, they are off "target" there. There price points are out of line with the value they are offering. There prices are going up in these branded areas....ie, Smith and Hawken, Converse in the last 12 months rather than keeping them in line with what's going on in the current environment. Also, they are cutting staff and after experiencing long lines in my two most recent shopping expeditions....which is what the upscale female customer makes to Target...the appeal of a more pleasant experience than Walmart is gone! Todd is right......they are in a fetal position and someone needs to act. Bill Ackman doesn't have a clue who the "target" customer is or what they are looking for. I am afraid management has forgotten as well. The are going to have to react quickly or risk losing the fickle upscale customer in the North East they have so recently gained in their latest expansion.

Apr 12 09:03 AM

[Aaron Epstein:]

I have been reading Todd Sullivan's continuing comments favoring Ackman's proxy fight to install his own board nominees.

Bill Ackman's business is HEDGE fund management, meaning taking high risks to obtain immediate high profits.

I have been a shareholder in the original Dayton Corporation since 1967 when there were just 15 Target stores. Today there are over 1600. The business was built brick by brick on solid footing.

The management has ALWAYS reacted to adjusting to current market conditions, but has NOT jumped to knee-jerk over-reaction which has crippled other companies.

A basic premise taught in marketing 1A is to compete with your competitors on your ground, not theirs. That is what Target has been successful in doing. Yes, Five years ago K-Mart announced that they were not going to sit back and let Walmart
be the lowest price retailer and attempted to match Walmart price by price. Not having Wal-Mart's purchasing power, and sophisticated computerized distribution system, they entered bankruptcy within 24 months.

Mr. Ackman's suggestion to sell off Target's real estate to realize immediate profits endangers Target's future profits and stability.
One of the main causes of Mervyn's bankruptcy was that they no longer had control over their real estate expense.

Mr. Ackman may now talk a different line, but I for one judge him by his past proposals and am voting to retain the current and very qualified Board and not endanger the future of the company at the risk of possible temporary market gain.

Aaron M. Epstein, N. Hollywood, CA

May 06 05:18 PM