Investors did not dump Target (TGT) shares after it posted weak Q1 results. Shrinking hurt the retailer’s profits. Known as retail theft, Target and Walmart (WMT) will need to reconsider their physical store exposure.
Target posted revenue growing by only 0.6% Y/Y to $25.32 billion. Comparable sales grew by 0.7% while digital sales fell. The EPS forecast of $1.30 to $1.70 is sharply below the $1.93 expected for Q2.
Walmart posted revenue growing by 7.6%. It expects net sales to rise by 4%. For FY2024, Walmart expects consolidated net sales to rise by 3.5%. At first glance, WMT stock is more compelling than TGT. However, the growth lags inflation, which implies flat Y/Y growth.
Retail executives need to tackle retail organized crime. In 2021, it cost the industry ~ $100 billion. The economy is in a serious decline.
Inflation rates are high, increasing food and shelter costs. This increases pressure on low- to mid-income consumers.
Honest customers are ultimately paying the price. Society will need more police to tackle the increase in crime.
Firms like TJX Companies (TJX) have investments in anti-theft initiatives. Conversely, Nordstrom (JWN) closed stores in San Francisco instead of racking up more losses from theft.
One retailer worth watching positively is Costco (COST). It charges a hefty up-front membership. This separates customers ready to buy goods from those tempted to steal.
