3 Reasons to Be Bearish on Target

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The demise of Target (NYSE:TGT) didn’t begin lightly. For years, the discount retailer has provided quality goods from clothing, food, and video games to DVDs, electronics, and home goods. Its prices have always been low, and customers were nearly guaranteed to find what they were looking for because of the store’s huge inventory. However, things began to turn sour very quickly as the franchise entered into winter 2013-2014, and now the company is feeling the heat. Shares are down more than 5 percent this year to date and 14.5 percent year over year, lagging a 2.9 percent YTD gain and a 16.5 percent year-over-year gain for the S&P 500.

First came the credit card breach: It was one of the worst in U.S. financial history, and Target has paid enormous financial and social costs in its attempt to resolve the issue. Next came the rollout of Target Canada. The company was betting that Canadian market would be healthy enough and the consumers hungry enough for discount big-box goods to justify the expansion, but the franchise had low inventories on almost all its goods and products and its prices were higher than expected. At the end of it all, the company’s CEO resigned, leaving no one at the helm to fix these issues.

2014 has been known thus far as the demise of Target. It has alienated its customers and needs to make meaningful reforms in order to address the headwinds it faces. To explore the idea, we’ll take a look at the aforementioned three major issues one at a time.

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