Goldman Sachs Group, Inc.: Challenges and Resilience Coexist in the US Retail Industry, Optimistic about Target Corporation (TGT.US) Standing Out

Goldman Sachs Group, Inc. recently released a report on the rating adjustment of the US retail industry, stating that the industry has shown some resilience at the end of 2024 and the beginning of 2025, but still faces various challenges such as the economy, competition, and supply chain. Retailers are seeing technological innovation, business, and market strategy adjustments as key to future growth, and continue to favor some retailers like Target Corporation (TGT.US). The report mentioned that Goldman Sachs Group, Inc. downgraded the fourth-quarter gross margin forecast of outdoor sports equipment retailer Academy (ASO.US), and stated that in discussions with management, it was revealed that the promotional environment in the fourth quarter was more competitive than expected, as some suppliers intensified promotions to clear inventory and compete for market share. Furthermore, Academy continues to benefit from consumer downgrading, with consumers earning over $100,000 shifting to products with higher value for money. However, the company's management also indicated that the economic situation is still not optimistic. Looking ahead to 2025, Academy expects profit margins to improve, mainly due to improvements in supply chain efficiency and the launch of new brands (such as NIKE, Inc. Class B). However, tariffs remain an uncertain factor, and the company has prepared for various scenarios. Additionally, Goldman Sachs Group, Inc. stated that the management of consumer electronics retail giant Best Buy Co., Inc. (BBY.US) emphasized that innovation will be key to growth in 2025. They emphasized that artificial intelligence will continue to be an important part of innovation. At the category level, the company expects strong performance to continue for computing devices and tablets. Furthermore, management added that large appliances are closely related to the real estate industry, and demand for large appliances will recover as the real estate industry rebounds. Best Buy Co., Inc. management expects incentive compensation to continue to be a hurdle to profit margins in 2025. Additionally, management added that they have seen strong performance in membership services and expect the impact of this segment to become neutral. The company also expects the impact of credit card profit sharing on gross margins to shift from neutral to a mild driving force. As for the well-known "dollar store" giant Dollar Tree, Inc. (DLTR.US), Goldman Sachs Group, Inc. stated that the company continues to implement a multi-price strategy, with the performance of 3.0 stores (which integrate about 15% of multi-price items) in the third quarter outperforming other types of stores. In the third quarter, the overall same-store sales growth of the company was 1.8%, while the same-store sales growth of 3.0 stores was 3.3%. The company's management's goal is to gradually convert 1.0 and 2.0 stores into 3.0 stores and increase the penetration rate of multi-priced items in 3.0 stores from about 15% to about 30%. Looking ahead, Dollar Tree, Inc. stated that the company is preparing for possible tariff increases. Management noted that strategies to address this include finding alternative markets and adjusting prices. Home Depot, Inc. (HD.US) management mentioned the performance of SRS Distribution, a residential professional trade distribution company acquired by the company, stating that SRS achieved $6.6 billion in sales in 2024, growing faster than Home Depot, Inc. stores, and is expected to continue to grow and expand penetration rates. Goldman Sachs Group, Inc. continues to be bullish on retail giant Target Corporation (TGT.US), maintaining a "buy" rating on the stock with a 12-month target price raised from $164 to $166. The firm stated that Target Corporation showed strong sales performance in November and December of last year. According to previously released sales data, the company's total sales increased by 2.8%, with same-store sales growth of 2.0%, with clothing and toy categories performing well. Additionally, Target Plus (a third-party marketplace) saw nearly a 50% growth. The company's management believes that this business still has significant growth potential and will be an important driver of future growth. Based on the company's strong performance, Goldman Sachs Group, Inc. raised its fourth-quarter same-store sales growth expectations to 1.5% and adjusted gross margin expectations to 25.5%. Earnings per share expectations for the fiscal years 2024 and 2025 were raised to $8.76 and $9.80, respectively. Finally, regarding store closures in the US, according to Goldman Sachs Group, Inc.'s data, more companies faced bankruptcy and large-scale store closures in 2024 compared to 2023. Significant examples include US storage supply retail chain The Container Store and Big Lots, Inc. (BIGGQ.US). As of the first quarter of 2025, some companies have already announced plans to close stores, such as Joann, Kohl's (KSS.US), and Macy's, Inc. (M.US).