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Target’s Earnings Continue To Decline; A Bankruptcy Filing By 2030-2031 Is Likely
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My next big short… Target is the new Kmart… This is not a temporary dip… Target’s brand and business model are now permanently impaired… What happens next… A warning on the economy… Nvidia reports earnings tonight… |
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On September 25, on X, I published a “short” thesis on one of America’s most popular retailers, Target Corporation (TGT).
I shared my view that Target has begun a terminal decline, much like I saw at Sears and J.C. Penney years ago. It has lost its core customer – affluent suburban “soccer moms.” The quality of Target’s merchandising and its staff has collapsed. You can see the result in its parking lots. They’ve become scary places around big cities.
Target is collapsing financially as a result: lower store traffic, lower same store sales, collapsing operating margins, all leading to far weaker free cash flows.
Target’s management has responded, so far, by cutting its capital expenditures (“capex”) – it’s building far fewer stores. But, eventually, to stave off a credit downgrade to “junk” it will have to cut its dividend. And, when that happens, it will truly be “good night Susie.”
As you might imagine, investors in Target didn’t take kindly to my skeptical view.
One poster predicted that my Target predictions would:
age like cat-shit wraped [sic] in dog-shit wrapped in chicken-shit like the rest of your ‘predictions.’”
Another helpfully reminded me that not all of my predictions come to pass in a timely manner:
Brother you’ve predicted 249 out of the last 5 market crashes and 876 out of the last 50 company bankruptcies can you stick to adverts in local news media instead of degrading the quality of my timeline?”
I got a chuckle out of that one.
I like to post my initial research into “hard to execute” ideas – investment ideas that are way out of consensus or where I have very little solid information – like shorting Target, on X. Why? Because millions of people frequently read my posts. And, more often than not, several of them will have critical insight into the opportunity. The jokes are also funny – if you’re not too thin-skinned. And, having lived the last 23 years of my life in a glass house with a Report Card waiting for me at the end of every year, my skin has gotten much thicker.
In Target’s case, connecting with store managers and other knowledgeable investors could give me a big edge. Then, when I’m certain I’ve got the story right, I will publish to our subscribers and put the idea in the Complete Investor portfolio. (If you want to see what I’m working on, please follow me on X: @porterstansb).
While it won’t grab the headlines like Nvidia surely will, Target also reported earnings today. And, sadly for its owners and employees, the results show a clear continuation of my short thesis: Target is the new Kmart.