Morningstar

Target Chalks Up Tepid Holiday Sales

We'd suggest investors remain on the sidelines of this no-moat retailer as we expect to shave around $1 from our $72 fair value estimate.

Securities In This Article
Target Corp
(TGT)

Lackluster sales plagued

We still believe Target operates with a well-known brand, convenient locations, and scale, but given its mix of offerings (particularly apparel and home), we expect it to be challenged as it looks to expand its digital commerce business (which soared more than 30% in November/December). In our view, the firm has failed to amass a cost edge to defend itself against established online competitors, such as Wal-Mart, which generates more than $13 billion in online sales, and Amazon, which generates around $75 billion domestically and $300 billion globally. These figures far outweigh the mere $2.5 billion Target generates through this channel (3.5% of total sales), supporting our no-moat rating.

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About the Author

Erin Lash, CFA

Sector Director
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Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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