By Tonya Garcia, MarketWatch
Target Corp. is scheduled to report third-quarter earnings on Wednesday before the opening bell, and analysts are bullish about the third quarter and holiday season.
But investors may be just as interested in a potential partnership announcement as they are in the retail giant’s quarterly results. Raymond James analysts think Target’s /zigman2/quotes/207799045/composite TGT +0.74% recent efforts could make it the perfect partner for Nike Inc. /zigman2/quotes/203439053/composite NKE +0.07% now that the athletic apparel and accessories company has ended its partnership with Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.79%
“[W]e see clear space for a retail partner that can appropriately sell Nike’s everyday athletic product as well as meet Nike’s partnership criteria,” Raymond James analysts led by Matthew McClintock wrote.
“Currently, department stores such as Kohl’s Corp. and J.C. Penney are selling this type of Nike product; however, we believe they fail to meet the majority of Nike’s partnership requirements. Target could be an ideal retail partner to fill this void and replace Kohl’s and J.C. Penney, for example, to sell everyday Nike product in an experiential, frictionless way, in our view.”
Nike announced last week that it would end sales of its product on Amazon’s site, an agreement that was first announced in 2017.
Wedbush analysts think this could benefit Caleres Inc.’s /zigman2/quotes/206226741/composite CAL +3.12% Famous Footwear chain and Shoe Carnival Inc. /zigman2/quotes/203407380/composite SCVL +1.17% , which both sell Nike merchandise.
Raymond James thinks Target is “perfectly aligned” with Nike’s “value-oriented product” both in its stores and online, especially now that brands like Levi Strauss & Co. /zigman2/quotes/204763189/composite LEVI +3.20% and Disney /zigman2/quotes/203410047/composite DIS -0.66% are selling there. Target is capturing a younger consumer who isn’t going to the mall, Raymond James says, and Levi has said it’s converting some of these customers to higher-priced merchandise. And Target has a long history of partnering with up-market brands like Marimekko, Hunter and others.
“[We] remain emboldened in our thesis that the brand’s distribution strategy perfectly aligns with Target’s heightened investment in both physical store experience as well as digital capabilities such as Drive Up,” Raymond James said.
Raymond James rates Target stock strong buy.
Target has an average stock rating of overweight with an average target price of $118.60, according to a FactSet survey of 27 analysts.
Here’s what else to watch out for in Target’s earnings:
Earnings: FactSet is forecasting earnings per share of $1.19, up from $1.09 last year.
Estimize, which crowdsources estimates from sell-side and buy-side analyst, hedge-fund managers, executives, academics and others, is guiding for $1.21 per share.