Target (TGT) posted its first fiscal quarter on Wednesday, and its shares declined by 8 percent. The giant retailer missed analysts’ estimates on earnings for the three months ending May 4. It also reported a year-over-year decline and the first missed earnings estimate since November 2022. The revenue report was similar to the analyst’s expectations. CWEB analyzes that the fall in earnings is due to the weak all-around economic scenario in discretionary purchases, though Target also saw lower sales in its food business.
Target reported earnings per share of $2.03, while Wall Street analysts polled by LSEG had estimated an EPS of $2.06. The giant retailer managed a slightly higher revenue of $24.53 billion, while the analysts had expected revenue to be $24.52 billion.
Target said that it would meet its full-year forecast. This prior forecast noted that comparable sales would rise to 2 percent from flat, and earnings per share would range from $8.60 to $9.60. Executives say that the second quarter will see a growth in sales.
The Minneapolis-based retailer saw lower sales in both food and discretionary items purchases. Food, beverage, beauty, and household sales declined by low single digits. Apparel saw an almost 4 percent rise as web fans bought spring outfits. Limited designer collections such as Diane von Furstenberg’s collection saw increased web fan traffic by millions and a 15 percent increase in their basket sizes.
Chief Growth Officer Christina Hennington, on a call with reporters, also said that other unique items, including Taylor Swift’s latest album with Target in-store events and photo ops, as well as its partnership with the brand Prince to sell pickleball gear, increased web fans’ spending.
Target announced on Monday that it will lower the prices on thousands of everyday essentials, including milk and bread, diapers, and paper towels. The discounter gets about 20 percent of its sales from groceries. At a time when web fans are cutting down on discretionary purchases, Target needs to attract more customers to buy everyday essentials and groceries. CWEB rates Target stock as a hold.
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