American big box retailer Target (NYSE:TGT) is closing nine stores across four states in the U.S. owing to rising theft and organized crime. The store closures include one store in New York City’s Harlem neighborhood, two locations in Seattle, three stores in the San Francisco-Oakland area, and three more in Portland, Oregon. The stores will be closed effective October 21, 2023.
Target currently operates some 2,000 stores in the nation. The company has undertaken several measures to curb organized crime at its stores. The retailer locked certain merchandise, hired third-party security services, trained store leaders to deal with potentially dangerous situations, and invested in cyber defense systems. Even so, these steps were not enough to stop the crimes. Commenting on the store closure, Target noted, “We know that our stores serve an important role in their communities, but we can only be successful if the working and shopping environment is safe for all.”
Organized Crimes are Affecting American Retailers
Since the onset of the pandemic, organized crime, retail theft, and employee/customer security have been prime challenges for retailers. These crimes led to escalated shrink rates (losses from damaged/stolen goods), rising to an average of 1.6% of retailers’ sales in 2022, similar to pandemic-era rates, as per the National Retail Federation data. For Target, the shrink is expected to reduce full-year profits by more than $500 million compared to the prior fiscal year. American retailers are pushing for a new bill called the Combating Organized Retail Crime Act to highlight the problem. The bill proposes harsher penalties for theft crimes, opens doors for retailers to exchange information, and brings stronger law enforcement.
Apart from the macro issues and theft, Target is facing several other challenges that are impacting its business. Like many other stores, Target is struggling with surplus inventory. It also suffered from Pride Month Merchandise promotions and shifting consumer preferences for discretionary products. Other retailers, including Walmart (NYSE:WMT), Nordstrom (NYSE:JWN), and Walgreens Boots Alliance (NASDAQ:WBA), have also shut stores this year, citing macro factors as well as organized crimes.
Is Target Stock Expected to Go Up?
Yesterday, Stifel Nicolaus analyst Mark Astrachan cut the price target on TGT to $130 (18.7% upside) from $145 while maintaining a Hold rating. The five-star analyst’s review comes after a general survey of retailers showed decelerating spending in mid-September and a muted holiday season for discretionary items.
Overall, out of the 21 Top Analysts who recently rated TGT, 11 have a Buy rating, while 10 have a Hold rating on the stock. Top Wall Street analysts are those awarded higher stars by the TipRanks Star Ranking System. This is based on an analyst’s success rate, average return per rating, and statistical significance (number of ratings).
Based on these top analysts’ views, Target stock has a Moderate Buy consensus rating on TipRanks. Also, the average Target price forecast of $147.95 implies 35.1% upside potential from current levels.
