Tuesday, June 6, 2023

"Target Is Being Financially Eviscerated Right Now As Major Retail Business Starts To Collapse"

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"Target Is Being Financially Eviscerated Right 
Now As Major Retail Business Starts To Collapse"
By Epic Economist

"Target has lost over $10 billion in just 10 days. The retailer is being financially eviscerated right now as investors sell off its shares, consumers reject its products, and executives fear the added financial problems will be translated into more store shutdowns, price hikes, and lower profits over the next few quarters. The company is in real danger, experts say. And that means Target may be the next one to fall during the Great Retail Collapse.

The decline of Target may happen sooner than everyone could have imagined. Since the start of the month, the retail titan is being absolutely hammered on the US stock market as investors go into full sell-off mode, wiping out $14 billion of the company’s market value. It all started after the company reported sluggish sales growth, disappointing forecasts for earnings for the rest of the year, and more recently, a controversial product release that sparked outrage amongst some shoppers.

The debate over its new Pride collection became extremely heated on social media in recent weeks. Earlier this month, the company announced that it would remove some of its controversial items as a result of threats made to its staff in stores. David Evans, the Chief Insights Officer for Collage Group, a consumer research firm, believes that Target failed to access the problem promptly and it became way too big to ignore. “They probably did lose control of the narrative,” he said.

But although Target’s recent stock collapse seemed a direct result of the Pride collection drama, and this probably has weighed into it, analysts don’t think a consumer boycott is the main reason the retailer is falling apart. Things have been ugly for Target for quite some time now. The big-box chain was already facing a painful downturn since 2022, and conditions have only gotten worse as Americans continued to cut back on non-essential spending amidst a weakening broader economy, according to CNBC.

Meanwhile, CEO Brian Cornell says the company is aware of the challenges consumers are facing this year and how this will impact sales growth, profits, and its financial health. He stressed that the retail chain was focused on managing the financial impact of all this so it can continue to keep its stores open. During a number of interviews, Cornell said he does not want to close more stores in 2023, but data exposed during a conference call with the media shows that the big-box chain is also expected to lose over $1 billion in profits by the end of the year.

No wonder why, the retail giant is flashing a consumer recession warning. “We continue to face elevated volatility and see a reprioritization of spending away from discretionary categories in the face of persistent inflation in groceries and essentials,” Target chief growth officer Christina Hennington said on a call with analysts. By now, the overwhelming majority of businesses in the United States for bracing for increased uncertainty and a prolonged economic recession. A recent survey conducted by the EY CEO Outlook Pulse revealed that the vast majority of US business CEOs, or a whopping 98%, are now preparing for an economic downturn characterized by geopolitical tensions, supply chain disruption, and financial insecurity. The current state of the US economy should be a major red flag for companies that, just like Target, have been in trouble for several quarters in a row. One single black swan event could rapidly push them over the edge, and into oblivion."
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