McGough on train to Boston...here's the real-time (un spell checked) exchange on TGT pre-release between him and the team (otherwise known as ‘us’)…
McGough: What's story w tgt?
Main question is whether this will make bears capitulate. the answer is yes -- for some. judging by stock action. At least today.
Thesis on TGT is that it will never grow again.
what is implied 2Q earnings growth?
Team: Preannouncement is odd, saying EPS above the range and 5-9cent benefit from tax, but it doesn’t give the actual EPS number, comps were 'modest' positive, but still implies a two year slowdown. So it appears to be a notable beat, but don’t know the magnitude or drivers.
McGough: What is EPS growing at high end of range?
Team: High end was -7% growth, so looks like down yy regardless
McGough: Will the street take up numbers meaningfully – for 2H?
Any evidence from the co to suggest that?
Team: No
McGough: That's the point
Our thesis is never grow again.
TGT is shrinking.
Higher end bc of tax.
Definitely wrong on the day – I won’t mask that for a minute.
but this cmpany is on track to firing its CEO (who is losing Board support and will put out a PR for every bit of reverse (financially)/engineered growth he can get. (#failing),
Lose job, do a dilutive deal
or both
or, in fairness, take down EPS by $1.50 bs he wants to catch up w widening investment gap between TGT and WMT/AMZN
#dontholdbreath
Team: From the Release:
“Target’s recent progress reinforces our confidence and commitment to our strategy as we build an even better Target for tomorrow. Following better-than-expected results in the first quarter, we’ve seen additional, broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment”
“The launch of Cloud Island in May was a success, and our team will be rolling out four more exclusive brands across Home and Apparel in the next few months, in support of our plan to launch 12 new brands by the end of 2018. We are also pleased with initial results of the Twin Cities rollout of Target Restock, providing next-day delivery of a shopping-cart-sized shipment from an assortment of more than 10,000 essential items.”
McGough Punchline:
That KSS/UA math might be relevant as an example of brands' impact on comp. Juicy, Puma, Vera, etc... It is immaterial for KSS. And those brands are actually relevant.
Changing around brands every is something I like to call 'retail'. the fact that you have to announce it shows a culture of extreme complacency.
The kind of culture behind a coimpan that does not know how to grow.
Growth here is akin to a 5' 11" basketball player that crushed it in High School, but is simply 'above average' in college, and fails in first three games of the NBA.
This company ‘growing’ is like Sasquatch…we hear about it, but the only people that think they’ll see it are smoking something…
If this pushes $60 lets’ get heavier
Team: FYI B...
Math on KSS UA benefit below
Meanwhile, KSS comped -2.7% in 1Q (the first quarter of the UA launch)… 150bps below expectation.
