Target's Discounting Plan Ends Up Cutting Its Stock Price as WellBy
Investors irked by potential threat to profit margins
Shares of Wal-Mart also tumble in wake of Target announcement
Target Corp.’s announcement that it was cutting prices on thousands of products led to one unintended discount: a nearly 5 percent stock drop.
The retail chain said on Friday that it spent months examining its products and promotions and was permanently lowering prices on everything from breakfast cereal to razor blades. The announcement was meant as an enticement to customers, but it gave investors the chills.
The shares fell as much as 4.7 percent to $55.66 in the wake of the news, which was posted on Target’s blog. Wal-Mart Stores Inc. dropped as well, with that stock declining as much as 3 percent.
An increasingly competitive retail landscape has made Wall Street more concerned about the margins at brick-and-mortar chains. Amazon.com Inc.’s acquisition of Whole Foods last month has put investors further on edge.
Target also faces a bit of an identity crisis. It needs to compete with Wal-Mart and Amazon on price, but the company also doesn’t want to lose its grip on more affluent shoppers, who had helped it earn the faux French nickname “Tar-zhay.”
Target shares plunged in February after the company first warned that it would cut prices and accept lower profitability.