Investors React As Target Announces New Strategy
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Target announced Tuesday it is changing strategies. Instead of settling into the upscale department store niche, the firm is joining the price war to try to match Walmart’s bargains.
The move shocked investors, who largely thought Target would fight for higher margins by defining itself as a more upscale retailer, Bloomberg reports. Instead Target announced it is lowering prices and will accept lower margins.
Target said it plans to retain shoppers by refurbishing over 600 stores and opening 100 smaller locations in cities and on college campuses over the next two years. Investors responded quickly — the firm’s share price plummeted 14% to $57.30, marking its largest intraday fall since 2008.
The change comes after Target reported weak fourth-quarter earnings that hit the bottom end of company forecasts. Profit was $1.45/share, below the average analyst estimate of $1.51. Same-store sales were down 1.5%.