Target, the troubled retailer announced that it is doubling its share buyback program to $10 billion and boosting its quarterly dividend by 7.7 percent on Wednesday. On Tuesday it denied the move when it inadvertently posted it on its website before the board had approved the measure.
The Minneapolis-based retailer is an excellent “canary in the coal mine” for the American shopper. It’s customer base spans the economic spectrum from lowest middle class on up.
The company has laid off more than 20k workers this year including 180 people on Thursday while it continues a year-long restructuring to combat falling revenue.
The US consumer is no longer an aspirational shopper, where older designer wares are coveted by shoppers.
The average Target shopper is now focused on value and needs, not aspirational wants.
Target shares are down 2.7% over the last 3 months after the initial pop when the company announced it would shut down its Canadian operations.
So like most of Corporate America, when you can’t grow your top line revenue and you have cut into the bone on layoffs, its time to do some accounting voodoo in order to goose the stock.
Like many before including Apple, Target will borrow money cheaply (for now) by issuing $10 million or so in bonds and buyback its stock at perhaps the top of the market and then raise its dividend.
Classic cat chasing its tail economics. Don’t be surprised in the next 3 months when the company comes out and says it doesn’t understand why there is so much short interest in the stock as a corporate raider like Carl Icahn or Bill Ackman comes in to agitate for more buybacks and increased dividend.