Is Target the next Best Buy?

Investing.com -- Target may be on the verge of its own turnaround story if Chief Executive Brian Cornell steps down in September and a new leader steps in.Investors will be looking for a fresh strategy to reverse falling sales, restore customer appeal and compete more effectively with Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN).

Target is losing market share in core categories, struggling in online business and there is a consumer perceptions that its prices are higher than rivals. These are similar to what Best Buy (NYSE:BBY) faced a decade ago when many thought it was headed for “death by Amazon.”

Best Buy’s revival under Hubert Joly between 2012 and 2019 had electronics retailer refreshed its stores, invested in its staff, committed to price matching, improved its website, cut costs and closed weaker locations. Most importantly, Joly set a clear vision for the company’s purpose and hired the right leaders to deliver it.

For Target, a new management team could take similar steps. That could mean using more private-label goods to narrow the price gap with rivals, trimming expenses to fund price cuts, improving the online shopping experience to reduce profit losses, and rethinking its store footprint. A sharper focus on returns on invested capital could help guide decisions."A new management, especially one with an outside perspective, could be a positive catalyst," analyst at Bernstein said. 

The bigger question is whether Target should invest heavily in a Walmart-like e-commerce supply chain, which may not pay off without greater scale. Without that, online sales may continue to erode margins unless the company finds a new approach.

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Better economic conditions could give Target more breathing room, but the company still needs to stop losing market share before any turnaround can take hold. For now, the outcome remains uncertain.

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