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Is Target a Bad-News Buy?

Big-box retailer Target (NYSE:TGT) released its quarterly earnings numbers last week, which it says were impacted heavily by crime. It estimates that this year, organized retail crime will weigh down its bottom line by $500 million more than it did in the previous year, as consumers are dealing with high inflation and worsening economic conditions.

CEO Brian Cornell said on the company's earnings call that, "the problem affects all of us, limiting product availability, creating a less convenient shopping experience, and putting our team and guests in harm’s way."

Sales were also unimpressive in Q1, with Target reporting that comparable sales were flat when compared to the same quarter last year. Overall, the top line totaled just under $25 billion and increased by just 0.5% from the prior-year period. Net income of $950 million was down nearly 6% as the company incurred higher interest expense during the period.

The company isn't too optimistic for the year, either, projecting that its comparable sales will be somewhere within a low-single-digit decline and a low-single-digit increase.

The retail stock dropped on the news and remains around where it started the year at. Trading at 18 times it estimated future earnings, the stock isn't a bargain buy but it still has the potential to be a good dividend investment – it yields 2.7%. However, with retailers likely still facing some hard times ahead this year, investors may be better off waiting as there could be more of a decline in Target's stock as the year goes on.