Teresa Rivas

There are some things, from baking sourdough bread to binge-watching Tiger King, that worked great during the pandemic but don't seem so appealing now. Target is one of them, but it doesn't need to go the way of Joe Exotic. One analyst sees a way for the big-box store to turn around.

Although Target was a 2020 winner -- an essential retailer that didn't close down and saw huge success with its fulfillment of drive-up orders -- it got hit hard in the second half of 2022, forcing it to slash guidance twice. Like many other retailers, supply-chain shortages during Covid-19 led Target to order too much merchandise just as inflation was really starting to hurt consumers, causing them to pull back on the discretionary items that make up most of its business. Unlike many other retailers, Target never really recovered, reeling from lower margins, shoplifting, and backlash from the company's decision to end its diversity, equity and inclusion commitment after more than two decades.

Of course, Target has been in binds before -- like during its short-lived Canada expansion -- and plenty of other retailers have made comebacks, such as Lowe's.

On Tuesday, Bernstein analyst Zhihan Ma delved into the question of whether Target can course-correct, asking "is Target the next Best Buy?"

Her answer is maybe -- but only if Target gets a new chief executive, and makes other investments in the business. She rates Target stock at Underperform with an $86 price target.

Ma likens Target to Best Buy, which was rescued "from the brink, at a time when many had left it for dead" amid the rise of Amazon.com by CEO Hubert Joly between 2012 and 2019. There are a lot of similarities between Best Buy and Target, as both companies were losing market share, struggling to offer competitive prices, as well as suffering from PR missteps that hurt a brand that previously commanded a cult following. Therefore, Ma argues that Target could make a similar comeback.

The first step, she argues, is finding a new CEO, a la Joly, that has a realistic view of the business and a vision for the future. Many others have similarly pointed to the need for a leadership change, and given the recent problems with current CEO Brian Cornell's tenure, Target will likely have to hire outside the company, she believes.

Yet that's not all Target needs. Ma says the company has to consolidate its private-label brands: The company has a roster of appealing owned brands that have served it well in the past, but bringing that number lower will help raise awareness and lower confusion among consumers, like Costco Wholesale's shift to its successful Kirkland brand. It could lead to cost savings too, which would help Target compete on price, particularly if a shopper can immediately identify which is the private-label option on each shelf.

Next, Target should invest in its stores and workers, Ma writes. Associates are stretched too thin -- restocking shelves, fulfilling online orders, and unlocking cabinets so people can buy deodorant -- and the latter task is indicative of how the in-store shopping experience has dropped off for many Targets; in addition, some stores may simply need to be closed. Fixing those two things will go a long way, she believes, along with doubling down on things that work, like its beauty offerings.

Target also needs to find an e-commerce strategy that works for it, rather than the current pricey setup. "Delivery is free above $35, the same as it is for Walmart orders," Ma writes. "The implication here is clear -- Target is going head-to-head with Walmart, but is bringing a knife to a gunfight. Walmart, with its scale, can meaningfully improve its e-commerce profitability from here. Target will find it more challenging."

Ultimately, it remains to be seen if Target's turnaround will be successful, Ma concludes: While some things may be easy to fix, the threats from Amazon and Walmart loom large.

"It's unclear if Target should go down the asset heavy path to build Walmart- like e-commerce supply chain capabilities, which may not pay off if Target doesn't reach greater scale," she writes. "But, if it doesn't, e-commerce is going to continue to bleed margins in the absence of a creative solution."

Of course, one thing investors shouldn't expect is a silver bullet. Even Best Buy's stock has slumped again in the postpandemic years. No wonder Wall Street is always asking what have you done for me lately?

Write to Teresa Rivas at teresa.rivas@barrons.com

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August 12, 2025 13:43 ET (17:43 GMT)

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