Target Hits Earnings Bullseye: TGT Taps 52-Week High & Offering Options Trade

**SPEAKER_1** (0:01)
Back on Morning Train Live, let's go inside out on Target's latest earnings report. Joining us now is Greg Portell, who's the lead partner, Global Markets, at Kearney. Greg, nice of you to join us. Thank you so much for your time. So it looks like the turnaround wheels are in full swing now. Just walk us through your reaction to what we heard from this company.

**Greg Portell** (0:19)
Well, there were two things that were really exciting with the Target News today. One, the transformations affecting both the top and the bottom line. A lot of times when you see these turnarounds, there's too much emphasis on just cost cutting. But in the Target case, they've been able to strengthen both their consumer activation and revenue line as well as the cost line.
Then the second big point is, they're doing this by focusing on being a retailer. When we've seen retail turnaround stories before, it's typically around, can they monetize real estate? Are they going to do some sort of financial engineering to split the.com from the legacy business? But in Target's case, they've been very effective at being a retailer, doing what matters to win customer dollars at store.

**SPEAKER_1** (1:03)
Yeah, it's interesting you raise the.com versus the bricks and mortar sort of in-house retailer, because I was actually looking for a pair of shoes this morning because it has these tie-ups with all these brands and you could only buy it online, which doesn't really help me because I don't really know my size. But yeah, you raise a really interesting point. How sustainable do you think this is? I mean, as far as the upcoming holiday season, as far as the run of the success we've already seen in this one.

**Greg Portell** (1:32)
Well, management was clearly very bullish when they started to raise the expectations for full-year results. So they're looking into the holiday season with some strength. And there's two things that would support that. One, a lot of the changes that they've been able to make are fundamentally changes. They've made stronger commitments to merchandising. They've emphasized the AI investments. They've gotten smarter with how they deploy and develop retail media. So these are capabilities that last beyond a particular quarters upside up and down. So that's one part that's really been successful for them. The second part is they've been able to drive store traffic and customer engagements. There has to be some optimism that they're going to be able to keep that customer through the holiday season, thus buoying results.

**SPEAKER_1** (2:14)
Yeah, and what does this tell you ultimately about the consumer right now? Because they're being what the market likes to say is choiceful.

**Greg Portell** (2:23)
They are very choiceful, which is sometimes frustrating for management teams, but I think what the target story tells us, and it's been reinforced by other earnings through the season, there is consumer strength. Now, there's consumer angst in the terms of they're very nervous, they're very concerned, but at the same time, there are gains to be found and there are dollars to be won. And it's also important to realize that the target story isn't being done in a vacuum, they are taking dollars off the shelf from other retailers. And the question will be which retailers aren't going to be able to keep up with them and are thus going to pay the price going into the last quarter.

**SPEAKER_1** (2:57)
And does it give us any clues about what we're likely to hear from Walmart?

**Greg Portell** (3:01)
I don't think it necessarily tips the hand there because you're talking about two retailers that have a lot of strengths. The question is going to be in the secondary and tertiary market on how much the second and third level companies are suffering.

**SPEAKER_1** (3:14)
Understood, okay, good point. I really appreciate it. Thanks so much for that. Breaking down those earnings from Target this morning, we see a nice reaction up 5%. Greg Portell, their lead partner, Global Markets over at Carney. Let's trade it now with Tom White, host of FastMarket, a good showing for Target. Lows as well, but just walk us through an example trade for this one, Tom.

**Tom White** (3:33)
Well, looking at these gains that we've seen, just going into the report, now it's reversed, it's gone higher. How do you look at this if you're maybe an investor going, oh, I missed this move? Well, here's a strategy that you can use to maybe buy the shares lower, and if it doesn't go lower, if it doesn't reverse, you can still be profitable on this type of trade leveraging the option market here. So, I looked at a cash-secured put, I went out a couple weeks until expiration, September 4th weekly option, so about 16 days until expiration, and I just sold a cash-secured put. It's neutral to bullish in stance. I'm selling the put that's out of the money to the downside, the 155 put in the September 4th weekly option series. You're going to collect a credit of roughly about $2.40, maybe a little bit less, but that credit you collect is what you can profit on this type of trade, $240 per put that you sell, if the stock remains above 155, right?