Target’s price-lowering gambit is seen as a long-term winner. Will retailers follow?

Goal (New York Stock Exchange: TGTIt shook the retail sector on Monday by announcing that it would cut prices on thousands of items in high-frequency categories such as food, beverages and household essentials.

The retail giant estimated that the pricing measures would save customers Millions This Summer Jefferies analyst Corey Tarlow believes the decision isn't necessarily bad news for investors because Target (TGT) You may end up adding market share and seeing increased sales growth over time. “Although pricing actions may hamper margins, we believe the company has efficient compensation that can lead to more profitable growth in the future,” Tarlow noted.

Crucially, Jefferies believes Target (TGT) is likely to support its previous full-year guidance when it reports earnings on May 22. While Target (TGT) is expected to report a same-store sales decline of roughly 3.7% year-over-year during the period in the first quarter, the Minneapolis-based company has been impressing investors on the sideline in recent quarters. Tarlow also said that from a valuation perspective, TGT is still trading below its historical averages. “On a FY2 P/E basis, TGT trades at 15.1x versus a 5-year average of 16.5x and at a 9.2x discount to WMT versus a 5-year average of 5.8x,” he noted.

Target (TGT) shares fell. 1.45% Late morning trading on Monday. Discounted Dollar Tree (DLTR) was 1.51% Lower and flake Dollar General (DG). 1.55% BBB Foods (TBBB) showed a 1.95% TJX Companies (TJX) fell. 1.45%big (large) shed. 2.35%And ROST stores poured in. 0.75% Less after the target announcement (TGT). In the grocery sector, Grocery Outlet Holdings (GO) emerged with a percentage of 2.87% drop. While these declines may not be directly related to Target (TGT) news, shares are sensitive to increased promotional activity in general. Walmart (WMT) rose 0.15% higher. The Bentonville-based retail giant's prices were slightly lower than Target's (TGT) on the same basket of basic consumer products.