Target's Results Hit the Mark
The narrow-moat retailer continues to benefit from its decision to part ways with its lossmaking pharmacy business and efforts to drive organization-wide efficiencies.
While sales continued to languish in the third quarter, no-moat
Comps ticked down just 0.2%, and while still negative, this was a moderation from the 1.1% decline in the second quarter. Traffic slipped 1.2%, as weakness in electronics and grocery persisted, although prices increased 3.5% and units per transaction ticked down 2.5%. Similar to the recent past, management attributed this improvement to signature categories that are growing at more than 3 times the rate of other categories. This suggests to us that an increased focus on its core competencies (style, baby, kids, and wellness) is bearing fruit. We're not convinced the solid back-to-school season performance will persist, with heightened competition making it difficult to exceed its updated comp range (down 1% to up 1%) during the upcoming holiday quarter.
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