Target may just be turning around faster than anyone had thought just a few weeks ago. The company appears to be moving very quickly to fix its admitted problems by removing the executives responsible for the recent security breaches, removing executives responsible for the Canadian inventory problems, and initiating a new digital initiative to push sales faster into the digital era.
For a company that's usually very secretive about its strategy, these have been very visible actions.
"We need to accelerate our digital transformation and become a leading omnichannel retailer. To do this, we will move quickly to become more flexible in how we serve our guests, eliminating barriers that prevent them from shopping with us where and when they want."
What's driving all of this? The obvious answer is the much publicized security breach last fall just before Christmas and affecting the busiest selling season for discount retailers. But more than that, the merchandise got stale, online sales weren't growing as expected and the revenues from their Canadian stores collapsed loosing $1.6 billion in its first year in business. All of this was just too much and Target had to do something.
CIO Beth Jacob has been fired as a result of the data breach which occurred under her watch. Also fired are the CEO Gregg Steinhafel as well as Tony Fisher, head of Target Canada, where Target stumbled so badly while entering that country.
Target's new digital initiatives were started by bringing together four technology leaders from outside the retail industry to form a digital advisory group to help speed up new ideas and push the retailer’s digital strategies. These four leaders are Match.com CEO and OkCupid founder Sam Yagan, Orbitz Worldwide’s Roger Lieu, Bain Capital Ventures’ Ajay Agarwal and Accompani CEO and former Google Analytics lead Amy Chang.
Match.com's CEO Sam Yagan lays out these ideas in the video below.
Target has already started testing the concept of same-day delivery of products purchased through their website, Target.com. Their plan is to also roll out this service next month in certain cities within the United States. The cities most discussed have been Boston, Miami and Minneapolis (no surprise picking this location). Shoppers at the Target.com website in these three cities will be able to sign up for this service and be charged $10 for delivery. Orders placed before 1:30 pm are expected to be delivered before 9 p.m. on the same day.
What gives me the greatest inclination that Target may be turning the corner is the price chart of the stock itself. As can be seen in the daily chart, the MACD is below the zero line and turning up. For me, that's a great sign. The RSI is also moving up and it looks like the price itself has bottomed and turned up. On the weekly chart the stock has put in a double bottom near 55 and the MACD and RSI are showing higher lows. All signs that the downward pressure is subsiding which is a precursor to a move higher.
That's my rationale for entering the stock later this week. If I'm wrong, it'll continue to move downward. But if I'm right, it'll start to move up soon and I'll be one happy young man. With a dividend distribution rate near 3% and a 3-year and 5-year dividend growth rate above 20%, this might just be a great stock for me to buy and hold.
Good Luck and Good Trading.