Target’s Problems May Signal the Beginning of a Paradigm Shift In the Retail Industry

Target’s Problems May Signal the Beginning of a Paradigm Shift In the Retail Industry

The retail sector has lagged behind the averages this year. Just take a look at the SPDR S&P Retail ETF’s (XRT) performance – down almost 4.5% year-to-date. The S&P 500 Index however has risen 5.7% over the same time period. This data seems to contradict the growing feeling of economic recovery and it’s clear that the reasons for retail’s sluggishness are more than skin deep.According to the Fed’s Beige Book, a collection of anecdotal economic information, regional banks saw moderate to modest growth in their local economies. Consumer spending, while not necessarily robust, has certainly seen a boost from its levels back in 2009 and has increased each year since. Yet despite this positive news, major retailers are reporting consistently disappointing earnings and lowering forward-looking guidance.Target Disappoints, AgainOne of the kings of retail, Target (TGT) has been suffering for a while now. The company’s recent 2nd quarter results weren’t completely unexpected with higher expenses and lower EPS guidance for next year. All seemingly related to the major security breach that occurred in 2013. Costs have risen exponentially since its computer network was hacked and customer’s credit card information was compromised.Digging a little deeper though, we find that an information breach isn’t the only thing dragging down numbers.Same-store sales figures are the go-to fundamental statistic used as a gauge for how a retailer’s stores (that have been operating for at least one year) are experiencing growth. In Target’s case, the figures are flat, meaning growth isn’t happening at all. If the slump continues, Target may even reduce its dividend, drop share buy-backs, and suffer another drop in its credit rating....