How Retail is Changing: Big Investments, Big Holiday Expectations, Big Costs for Target | Summary and Q&A

TL;DR

Target and Lowe's both reported disappointing third-quarter results, leading to a drop in stock prices. Target's costs are rising as they invest in their supply chain, while Lowe's is struggling with the softening housing market and store closures.

Key Insights

• 🥺 Target's costs are increasing as they invest in their supply chain to meet customer demands, leading to disappointing financial results.
• 😀 Lowe's is facing challenges from store closures, the softening housing market, and increased costs of items like lumber.
• 🤝 L Brands is dealing with issues at Victoria's Secret, including declining comp sales and a departure of its CEO, while Bath & Body Works performs relatively well.
• 😀 Traditional retailers are facing competition in the e-commerce era, and some are struggling to adapt to changing consumer demands.
• 👪 The housing market slowdown is impacting both home improvement stores like Lowe's and general retailers like Target.
• ❓ Investors may find more stability and growth potential in companies like Home Depot compared to traditional retailers like Target and Lowe's.

Transcript

Chris Hill: It's Tuesday, November 20th. Welcome to Market Foolery. I'm Chris Hill. Joining me in studio, from MFAM Funds, the one and only Bill Barker. Thanks for being here! Bill Barker: Thanks for having me! Hill: It is a short week for us here at Market Foolery. We are off on Wednesday, we're obviously off for Thanksgiving. The market is closed... Read More

Questions & Answers

Q: What were the main factors behind Target's disappointing results?

Target's costs are rising due to investments in their supply chain, which is impacting their short-term performance. The company is focused on meeting customer demands such as order online, pick up in-store or curbside, but this comes with increased costs.

Q: How is Lowe's dealing with the challenges in the housing market?

Lowe's is closing stores in Canada and the U.S. and taking a charge to earnings as a result. The housing market has shown signs of softening, leading to reduced margins and increased prices of items like lumber due to tariffs.

Q: What are the implications of L Brands cutting its dividend?

L Brands, the parent company of Victoria's Secret and Bath & Body Works, announced a dividend cut and took write-offs for store closures and underperforming assets. Victoria's Secret, in particular, is facing challenges as comp sales dropped 2% and the CEO departed.

Q: Is there any positive news for retailers in the midst of these challenges?

Bath & Body Works, a brand under L Brands, reported comp sales increase of 13% in the third quarter and raised guidance for the full fiscal year. However, Victoria's Secret continues to struggle with attracting customers.

Summary & Key Takeaways

• Target's third-quarter results fell below expectations, with costs increasing as they invest in their supply chain. The stock price dropped 9% as a result.

• Lowe's third-quarter results were not as good as Home Depot's, with store closures and the softening housing market contributing to decreased performance. The company also cut its forecast for the full fiscal year.