TGT is piloting a Tender-Agnostic rewards program. Yet another molehill for a company that needs to move mountains. [Link to our note on why we think this story is broken LINK: TGT | Why We’d Short It Today]. Note that we're hosting a Black Book presentation on TGT on Wed Sept 21 at 11am EST.
Two Key Points
1) This is a 4-market test – and while it may not be meaningful to the actual results the company prints we think it’s telling about the company’s speed to insert new initiatives into the pipeline. There was a lot of buzz upon Cornell’s hiring about speed, but the data we’ve seen to date -- LA25, Chicago localization, Cartwheel Rewards --shows a lack of speed. This company needs something big, and big this is not. Cornell needs to up his game.
2) Target going Tender agnostic rewards. It’s not 5% cash back and free shipping which the Red Card offers, but the free shipping benefit isn’t really much of an offer. At the very least this double incentives TGT’s core not giving the company a big additional benefit. Worst case it discourages sign-ups for the Red Card which serves as an offset to SG&A, about 14% of EBIT. People who use the Red Card also carry the cards listed in the chart below based on our survey of 1,000 consumers. Tender-Agnistic rewards gives the consumer a decision tree to get Amex points or frequent flier miles instead of being wed to Target's legacy credit options/income.
