“Target is in the process of lowering prices on 5,000 frequently shopped items shows that the retailer is working to improve its sales trends,” UBS said, calling these initiatives indicative of the company’s strong position rather than any weakness.
It is probable that Target has been enjoying healthy increases in profit margins, allowing it to allocate resources back into the business. “This is from areas like improved shrink, better markdown management, enhanced supply chain operations and other efficiencies,” UBS said.
With this move, Target will show that it can still generate comp sales and margin growth despite lowering these prices. Its EPS range is expected to remain between $8.60 to $9.60, with Target likely raising the lower end of the range, UBS added.
UBS has a buy rating on Target with a price target of $191.