I may have noted that Target
Target's third-quarter net income decreased 4.4% to $483 million, or $0.56 per share. Total revenue increased 9.3% to $14.84 billion, and Target had a 3.7% increase in same-store sales in the quarter. The company pointed to soft sales of higher-margin products, like apparel and home goods, as part of the reason for the profit shortfall.
That's not surprising: Given the housing slowdown, many companies have complained of a negative effect on home furnishings and decoration. Furthermore, many retailers suffered a cruel October, and apparel has been a weak category lately.
Target also announced a $10 billion share buyback. Investors might be wary; Target's going to increase its debt to do this. (As of now, Target's got just $627 million in cash, and $11.2 billion in long-term debt.) Does it make sense for companies to pay interest to buy back shares? Although I know Target is financially healthy, and many investors have no problem when companies tinker with capital structure, it often makes me uneasy. A common problem with this kind of plan would be if business slows down, and I'd rather see conservative strategies when we could very well be facing a recession.
In an interesting aside, Target said that despite current perceptions (probably referring to concerns about consumer weakness, and of course heavy coverage of Wal-Mart's
I have definitely tended to be long-term bullish on Target. Like Costco
Am I changing my mind now? Not exactly, but I'm feeling like maybe it's a good time to go into wait-and-see mode on this one.
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