Deutsche Bank Trims PT, Lowers Ests on Target (TGT) Following String of Bad News

Deutsche Bank maintains its Hold rating on Target (NYSE: TGT), but lowers its price target down from $61 to $60.

Anlayst Paul Trussell commented that it was time to get more constructive on Target following a recent bout of bad news and lowered expectations. The analyst cautioned that the combination of decelerating U.S. SSS and further margin pressure in Canada puts the level of TGT's buyback in jeopardy - potentially leading to FY14 EPS to fall below Street expectations.

Trussell sees Q4 comps down about 5 percent following announcement of a security breach amid a strong start to the quarter and suspects that volatility will continue into H114. He said, the lack of a bounce in TGT's discretionary categories in 2H13 (home in particular) despite the improved top-line of peers has us concerned that the customer has moved on to other shopping outlets.

Target has been hit with lower-than-expected sales and higher inventory levels in Canada during year one of its operations in the market, which has led to significant merchandise margin pressure in the past two quarters, Trussell observed. The analyst noted, We do not foresee margin relief near-term however as some of 1Q14 orders were made many months ago (ie. bicycles) and were unable to be adjusted to the company's top-line run-rate.

For FY13, Trussell lowers EPS expectations 20 percent to $1.20 to $1.30 and adjusted FY14 and FY15 EPS moves to $4.72 and $5.02, respectively.

For an analyst ratings summary and ratings history on Target click here. For more ratings news on the retailer click here.

Target closed at $62.62 last Friday, with a 52 week range of $59.72 to $73.50.

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