Target beat revenue but company warns on current quarter, calls for cautious consumers

Target’s ( TGD ) first quarter lacked an outright strike on the bullseye, as customers continued to be reluctant to shop the store’s more discretionary sections amid high inflation and a sluggish economy.

“We come into 2023 with a clear eye on what consumers are facing with continued inflation and rising interest rates,” said Target’s president and CEO. Brian Cornell In a call with reporters. “As consumers and businesses face the challenges of change for the third year in a row, we were determined to build our guests’ confidence by coming together as one team to deliver affordable happiness every day.”

The impact of various economic cross-sections on Target’s revenue output is not difficult to discern.

Target has called for “gentleness” in preferred merchandise such as clothing and home goods. Digital sales were down 3.4% from last year. The company did not buy back any of its shares during the quarter.

The retailer guided second-quarter earnings below analyst estimates and set a cautious tone for the potential start of the key back-to-school shopping season.

Cornell remains optimistic, however, that the second half of the year brings better news.

“The mix of traffic we’re seeing, the relationships we’ve built with guests, the flexibility of actions we’ve taken on inventory gives us later in the year, and the new mix of new traffic and consistent trends we’re seeing in food and beverage, homewares and beauty, the right agility to continue to meet guest needs. and gives us great confidence that we can navigate the challenging consumer environment with flexibility,” Cornell told Yahoo Finance. call

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Income statement

  • Net Sales: $25.18 billion vs. $25.3 billion 0.6% YoY

  • Gross Profit Margin: 26.3% vs. 25.7% and estimates of 26.52% a year ago.

  • Reserve Growth: Estimates for -5.1% vs. -16% YoY

  • Diluted EPS: Estimates of -6.2% annualized to $2.05 and $1.80

CHICAGO, ILLINOIS – NOVEMBER 16: Shopping carts line up outside a Target store on November 16, 2022 in Chicago, Illinois. (Photo by Scott Olsen/Getty Images)

What else caught our attention

  • Inventory fell 16% from a year earlier, with inventory of favorite categories such as apparel and home goods reduced by 25%.

  • Digital comparable sales fell 3.4%. This was a 3.2% increase over the previous year’s quarter.

  • Beat Wall Street earnings estimates for second quarter after missing three times.

  • Second-quarter earnings per share are seen in estimates of $1.30 to $1.70 and $1.96.

  • Full-year earnings per share are seen in the range of $7.75 to $8.75 (reiterated) vs $8.36.

Pre-revenue vibration on target

  • Year-to-date share price performance: +5.8% vs. +7.4% target for S&P 500 and +5.7% for Walmart.

  • One Year Stock Price Performance: Target -28.2% vs +3% S&P 500 vs +2% Walmart.

  • Bank of America: “We maintain our neutral rating because Target’s strong omni-channel positioning, discount store decades of exposure and valuable multi-category assortment will be overshadowed by discretionary pressures.” -Explorer Robert Ohms.

  • Jeffries: “Currently, the target trades at 14.9x FY’24 P/E, below its historical average of 2.5x. At this multiple, we believe the target is undervalued with upside as fundamentals improve.” – Analyst Corey Tarlow.

Brian Sozzi He is the managing editor of Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi And on LinkedIn. Notes on the banking crisis? Email [email protected]

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