National Post (National Edition)
Target’s plan to further cut prices spooks investors.
RETAILER’S SHARES DROP 12% AS PLAN TO SHIFT DOWN MARKET LEAVES INVESTORS WARY
NEW YORK • Target Corp. became a retail phenomenon — and a stock market darling — with a rare mix of hip products and bargain prices.
Whether the company can stick to that playbook is now in doubt.
Target stunned investors on Tuesday by abruptly announcing that it would move prices further down market, into the realm of its No. 1 rival, WalMart Stores Inc., and accept lower profit margins as a result.
The news sent Target shares tumbling as much as 14 per cent, the most in more than eight years, and underscored the challenges confronting retailers caught between the twin juggernauts of American discount king Wal-Mart and online giant Amazon. Tuesday’s move, coming after years of stagnant growth and its disastrous foray into Canada, represents a risk to Target’s long-held objective of wooing more affluent shoppers — an approach that won the company its faux French nickname, Tar-zhay.
While cutting prices may draw more people in the door, it also may alienate consumers seeking a more upscale retail experience. To hold onto those shoppers, Target will refurbish more than 600 stores and open about 100 smaller shops in cities and college campuses by 2019. It’ll also introduce a dozen new store brands in areas like apparel and homegoods, trying to replicate the success it’s had with labels like the Cat & Jack kids’ fashion line. Still, the judgment in the stock market was swift.