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Was Target's Bathroom Boycott An Unexpected Tailwind For Wal-Mart?

Was Target's Bathroom Boycott An Unexpected Tailwind For Wal-Mart? - Target Corporation NYSE:TGT, Amazon.com, Inc. NASDAQ:AMZN

Target Corporation (NYSE: TGT)'s entry into a hot topic debated among "Main Street" resulted in a boycott against the retailer that may have affected its sales performance.

Target took a political stance earlier this year and said that guests and employees are free to choose whichever bathroom matches their gender identity. The announcement prompted more than one million people to sign a pledge to boycott the retailer.

Now that Target has reported its second-quarter earnings results, investors can take a closer look at the company's policy and better understand what effect, if any, the bathroom policy had on sales.

Target reported on Wednesday that its second-quarter revenue fell 7.2 percent from a year ago to $16.17 billion. The drop seems notable, considering revenue fell by 5.4 percent year-over-year in the second quarter to $16.20 billion and fell by 0.6 percent in the prior quarter — marking three straight quarters of negative revenue growth after more than a year of quarterly revenue growth.

But, What's It Mean?

There are essentially two takeaways from to be found here. First, Target's business has been in decline since the fourth quarter of last year, and the momentum merely picked up. After all, analysts at Morgan Stanley said in May that Amazon.com, Inc. (NASDAQ: AMZN) is becoming a massive threat to Target, more so than Wal-Mart Stores, Inc. (NYSE: WMT).

On the other hand, an acceleration in year-over-year revenue decline in the recent quarter does make the argument that Target's bathroom policy affected its sales, as more than one million customers pledged to shop elsewhere.

This theory may also be validated by the fact that Wal-Mart delivered its second consecutive quarter of year-over-year growth.

Wal-Mart said on Thursday its revenue rose 0.6 percent from a year ago to $120.9 billion.

Wal-Mart's 0.6 percent year-over-year gain in revenue actually marks a deceleration from the 0.9 percent growth, although last quarter's revenue was $5 billion lighter than its most recent quarter.

Bottom line, Target's quarter-over-quarter revenue was nearly flat based on a pure dollar amount, but Wal-Mart's revenue rose by $5 billion. It may be safe to conclude that the evidence supporting either side of the story has both valid points and flaws.

According to CNN Money, Target's executives insist that the bathroom policy had no effect on the sales decline, but the organization behind the boycott is most certainly claiming a victory.

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DateFirmActionFromTo
Aug 2016Goldman SachsMaintainsNeutral
Aug 2016CitigroupMaintainsBuy
May 2016Goldman SachsMaintainsNeutral

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