Golf clap on $240mm in higher 2017 SG&A and $500mm capex. But that stacks up against WMT and AMZN – EACH OF WHICH is spending an incremental at $2.5BN. #notenoughcornell. This is GOOG vs YHOO all over again.
Do you believe this TGT blow up? I do…Written in the cosmos. It’s gonna take far more than this to close gap w competitors stepping on the gas. This guide down is not enough. Maybe it is for 2017 -- or the next 2 quarters -- but not for 2018, 2019, 2020...
- Cornell will lay out how ‘it’s investing for the new world of consumer shopping behavior’.
- Thanks man. But how do you make up for the fact that your two biggest competitors started doing this 10 years ago?
- This is kind of like Yahoo and Google…will Yahoo EVER catch up? Not without a chance – or at least not without stepping up to take up capex and SG&A 10-fold and take 3-years executing on it WHILE Google still steps on the spending accelerator.
- How McLean is doing the math, TGT is upping SG&A by about $250mm and capex by $500mm. Golf clap. But stack that up $5bn combined (split evenly) for WMT and AMZN.
Cornell just probably bought himself another year of job security. But when he gets fired, the company will likely have to backstop the increased cap spending with a dividend cut.
Here’s what I noted in yesterday’s HRD…
I’m so comfortable being short Target into Tuesday’s analyst meeting.
I know TGT is a consensus short. But there are times when the consensus is simply not a) bearish enough, and b) bearish for the right reasons.
Remember in 2014 when TGT’s earnings came down by $0.60 and the stock went up 30%? Unless we see consumer stocks egregiously revalued or TGT is acquired (no), I’ll venture as far as to say that the whole ‘EPS down and stock up’ is well beyond improbable.
The way I see it, Cornell takes one of three paths on Tuesday…
A) He takes down comp guidance to something negative for 3-4 years, takes up SG&A, Capex, and keeps earnings flat for the remainder of this decade. There’s your most bullish outcome/
B) He sticks by his ‘comp up lsd forever’ mantra, while ‘prudently managing costs and capital deployment’. This is what gets the company to a point where Cornell won’t lead next year’s analyst meeting.
C) We see something in between – which is likely to continue the drip drop of market share loss, and margin/ROIC erosion, and takes away every part of the value proposition except stock repo – a strategy his team is horrible at executing upon.
When all is said and done, this company and management team is in deep trouble regardless of what its talking heads do or say. At $66.51 this matters a lot. This seems to me that it’s like what Macy’s was a decade ago – and that’s underperformed that market by 50%. Target is likely to follow unless it takes down expectations materially – not by sandbagging, but by genuinely investing far more capital into this model that the Board of Directors is likely to consider.
