Target Corp. was downgraded Thursday to sell from neutral at Goldman Sachs on concerns that the retailer's efforts to compete with Amazon.com Inc. will lead to "stagnating" sales and profits. Target's price target was cut to $67 from $77. Analysts believe Target "has fared better than most in the face of" the shift to e-commerce, with margins falling less than other retailers. But the company is facing growing competition with Amazon in apparel and consumables. A proprietary Goldman Sachs survey found that Target customers are more likely than customers of other discounters to have a Prime membership, with penetration reaching more than 50% in the last six quarters. "Customers who indicated they prefer shopping at Target also marked that they often shop for apparel, books, health and wellness and cosmetics online - most of which are in Target's 'Signature Categories,'" the note said. "As Amazon's offerings in these categories continue to expand, we are concerned about Target's ability to maintain its growth rates and market share given high Prime penetration of the customer base." Target stores are located in places that analysts believe are at risk for "Amazon encroachment": densely populated markets. Target stores are also overlapping with high-end grocers like Whole Foods Market Inc. , putting the retailer's grocery business at risk. Target stock is down 0.4% in Thursday trading, and down nearly 4% for the past year, while the S&P 500 index is up 20.7% for the 12-month period.
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