Target shares remain underwater as CEO pick and exec assurances fail to soothe investors

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Target’s (NYSE:TGT [https://seekingalpha.com/symbol/TGT]) CEO announcement and second quarter results continued to weigh on shares during the company’s earnings call despite management’s best efforts to assure investors the company is well positioned to recover market share and restore traffic through partnerships (Champion), trading cards, and new product launches.

While there were bright spots in Q2 to fuel growth in the current quarter – back-to-school and back-to-college sales, strength in its trading card business, and strong sales of the Nintendo Switch 2 – Target executives acknowledged that challenges remain within a “highly volatile environment.”

As a result, Target (NYSE:TGT [https://seekingalpha.com/symbol/TGT]) continues to “plan cautiously for the back half of the year because of this uncertainty,” Chief Commercial Officer Rick Gomez said on the call.

Additionally, FY25 profit and loss “will continue to show some short-term pressure from tariffs,” leading the company to rely on technology in a greater way to increase efficiencies, protecting margins, and, eventually enable the company to resume share repurchases.

Despite Target’s (NYSE:TGT [https://seekingalpha.com/symbol/TGT]) lackluster past performance, management said sales trends strengthened noticeably in June and July compared with May, especially for tech accessories and toys under $20, while one-time tariff costs have already been absorbed and are now behind the company.

“The vast majority of tariff costs were from order cancellations which were primarily recorded in Q2 and will not reoccur in Q3,” CFO Jim Lee clarified on the call.

Unfortunately, these assurances did little to revive shares and reassure investors that Target (TGT [https://seekingalpha.com/symbol/TGT]) can recapture lost market share to Walmart (WMT [https://seekingalpha.com/symbol/WMT]) and Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]), especially in its digital business.

And the CEO choice continues to plague Target's (TGT [https://seekingalpha.com/symbol/TGT]) stock.

“Many in the market favored an external hire, arguing that would be the only way to re-energize this retailer and jump-start its strategic reinvention. Now, with the company's decision to go internal, we think the market will now likely question how its trajectory could change meaningfully,” UBS’s Michael Lasser said in a note to clients, adding that “the time seemed right for a new set of eyes and ideas; either the company disagreed or could not find a high profile executive to take on the challenge.”

MORE ON TARGET

* Target: A Long-Shot Bet [https://seekingalpha.com/article/4815021-target-a-long-shot-bet]
* Target: Strong Financials Vs. Weak Growth [https://seekingalpha.com/article/4805918-target-stock-strong-financials-versus-weak-growth-hold-for-now]
* Target: Recent Struggles Show A Surprising Reality For This Retailer [https://seekingalpha.com/article/4805500-target-recent-struggles-show-a-surprising-reality-for-this-retailer]
* Target limps into the open as CEO choice overshadows better-than-feared Q2 results [https://seekingalpha.com/news/4487343-target-limps-into-the-open-as-ceo-choice-overshadows-better-than-feared-q2-results]
* Target names Michael Fiddelke CEO; shares drop [https://seekingalpha.com/news/4487349-target-names-coo-michael-fiddelke-as-ceo-succeeding-brian-cornell]