TGT Anxiety and the Future of Retail

[Dividend Watcher]

(05-21-2014, 04:59 PM)Kerim Wrote: I’m just not sure that bricks and mortar retail stocks are a great long-term holding.

Kerim, this thought has passed through my mind in the past and I've thought about this more since you posted it.

First, Target is NOT Sears. The comparison is almost ludicrous. Target has a management team that seems to be proactive both in management of the business and in rewarding shareholders. Sure they've stumbled both with the data breach fiasco and with judging what consumers want which, to me, is the holy grail of retail. There are hundreds of retailers that make that mistake every day. Sears, or should I say Eddie Lampert & his cronies, has done what with their household "gold standard" brands, Craftsman, Kenmore and Diehard and with their ubiquitous locations? Lampert & Co. has become, to me, the poster child for binding "Say on Pay" rules and barring institutions from voting shares without their beneficial shareholders proxy.

Second, what prevents TGT from finding the right programmers to boost their online presence and compete on better terms than they do now? I've shopped Amazon and I see nothing special to their ordering process compared to several other retailers and my business distributors. I also find it hard to believe that we'll all be sitting in front of our computers ordering everything we need from Amazon and having it drop from a drone out of the sky for free.

Third, I still don't think we are in a normal retail economy yet. The income gap and the slowly developing recovery from both a financial and housing collapse still are having a lingering effect on both business and consumer spending patterns. Perhaps it has changed forever and retail businesses will have to use a new strategy.

That being said, changing strategy, revamping a business or restructuring an operating corporation, especially one the size of Target, does not happen over night, in a week, a month and probably not even within a year or two. There will be stumbles along the way as consumer choices zig as you zag trying to hit the target (pun intended ).

So, I guess you have to decide whether you think it's worth your time and patience to remain invested or to increase your investment. Do you think the dividend growth streak can continue? Can management right the ship in an acceptable period of time? Are you patient enough for them to do it? What was your initial thesis for investing in TGT?

I don't own TGT although I do own ROST for my own reasons which are not relevant to your choice. Good luck deciding what to do.