Target stock hit by inventory issues, retail theft in 2023

Target (TGT) shares have tumbled by over 27% in 2023 on waning post-pandemic demand, excess inventory, and rampant organized retail theft now costing the chain over $1 billion. Despite all this, Wall Street remains cautiously optimistic. Yahoo Finance's Brooke DiPalma reports on the retailer's outlook ahead of its third-quarter earnings in November.

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Video Transcript

BROOKE DIPALMA: Year-to-date shares of Target are down more than 27%. This is the first stop we're taking a closer look at. Compare that to the S&P 500, which is up around 10%, and it's pretty clear that the retail giant hasn't been exactly hitting the bull's eye, so to say. When it comes to winning over consumers, shares of Target climbed significantly during the pandemic when people were stuck at home, revamping their spaces, while they saved cash. But the downward trajectory of shares kicked off in spring of 2022 as soaring inflation spooked consumers.

Some of the top issues facing the stock include a shift away from spending on goods and instead toward experiences. Inventory issues and shrink, mostly retail theft, expected to hit profits to the tune of $1.2 billion between this year and last year. Rising theft caused Target to close nine stores this fall in cities that were hit the hardest, including Seattle, San Francisco, and New York.

Now other factors pressuring the stock include competition from Walmart and backlash against the company's Pride Month collection earlier this year. Target's Q2 earnings showed a miss on sales for the first time in six years. And the retailer cut its full-year forecast.

Now in a call following the results, CEO Brian Cornell said its guidance is consistent with the cautious planning approach, given the current consumer and economic backdrop. But it's important to note here that there is still some optimism on the Street. There are currently 20 buys, 21 holds, and 0 sales on shares of Target.