Target Sales Drop Following Controversy

Target Sales Drop Following Controversy

On Wednesday, Aug. 17, Target saw the value of its shares fall just over 6 percent, far beyond what company leadership had predicted. As the market closed on Aug. 16, Target’s shares were worth right around a steady $75. By 7 a.m. on Wednesday morning, the value of the shares had slipped to $72, and the slide continued.

“Based on the current retail environment the company believes it is prudent to lower its expectations for comparable sales in the second half of the year,” Target stated. It is currently the sixth-largest retailer in the United States.

The sudden drop in stock worth comes after the retail super-store cut its fiscal-year profit outlook on Wednesday morning, in response to quarterly sales numbers being lower than anticipated.

With the internet providing easy access to the market, companies such as Amazon and eBay have cut into the market shares previously dominated by retail chains such as Target. According to the U.S. Census and U.S. Department of Commerce, online sales have risen from ~3% in the first quarter of 2006 to ~8% in the first quarter of 2016 as a percentage of overall sales. The trend has risen steadily each year, and there is no obvious reason why there might be a downturn in the percentage of online sales. In fact, Target’s online sales increased 16 percent and accounted for 3.3 percent of the company’s total sales.

In a 2014 issue of Consumer Reports, it was reported that people began spending again in 2014, after seven years of recession. While this upturn in private spending certainly helps businesses and the economy, it is never certain which markets will benefit. Reports show that people are more likely to spend money on big-ticket items (cars, houses and home repairs, appliances, etc.) than on things such as clothes or other such comfort items. This is likely due to the more necessary nature of vehicles or repairs, as opposed to clothes or decorations. The fear of economic downturn remains in the minds of those who were affected by it.

In the past year, Target stock value hit its high-water mark at $83.98 per share on Apr. 19. By May 19, share prices had dropped to $67.06 per share.

In April, Target announced its policy of allowing any person to use whichever bathroom they chose to, based upon their personal gender identification. There was a significant amount of support as well as backlash. In May, the American Family Association, a Tupelo, Ms.-based religious non-profit organization, launched an online petition to garner support for a boycott of all Target stores.

Target stocks did recover roughly 50% of their value by Aug. 1, 2016, which coincides with back to school shopping for students around the country.

“Although we are planning for a challenging environment in the back half of the year, we believe we have the right strategy to restore traffic and sales growth over time,” stated CEO Brian Cornell in a recent statement. Net sales fell 7.2% in the second quarter.

Abby Brookshire is pursuing a chemistry degree at UT Arlington. When she's not playing video games from her childhood she's writing articles and wondering onto farms to pet cows. She is the self designated most fabulous member of Refined Right. Abby loves to meet new people, especially those who disagree with her politics and/or supply free sushi.