Profit beats target, but company warns about quarter, urges cautious consumers

of the target (target) The first quarter was not a direct hit as shoppers remained hesitant to enter the more discretionary sections of stores amid rising inflation and a weak economy.

“We have entered 2023 with a clear eye on what consumers are facing with sustained inflation and rising interest rates,” said Target’s chairman and CEO. Brian Cornell on the phone with a reporter. “With consumers and businesses facing dynamic challenges for the third year in a row, we are determined to build guest trust by coming together as one team to deliver affordable delights every day. I did.”

It wasn’t hard to spot the impact of various economic reversals on Target’s earnings call.

Target appealed for the “softness” of discretionary products such as apparel and household goods. Digital comparable sales declined 3.4% year-on-year. The company did not buy back its shares in the quarter.

The company also said second-quarter earnings are expected to fall short of analyst estimates and warned of the potential start of a significant back-to-school shopping season.

But Cornell remains optimistic that the second half of the year will bring good news.

“The traffic we’re seeing, the guest relationships we’ve built, the flexibility the actions we’ve taken on our inventory in the second half of this year have given us, and the new trending products and food and beverage, The consistent trends we see in home and beauty products give us great confidence that we can navigate a challenging consumer environment with the right amount of agility and flexibility to continue meeting guest needs. ‘ Cornell told Yahoo Finance. call.

In its earnings call, Target estimated that depleted inventories, primarily theft of merchandise, would reduce profits by a whopping $500 million this year.Mr Cornell said retail organized crime problem The situation is getting worse, it’s nationwide, and it’s spreading across different product counters.

Earnings overview

  • Net sales: $25.3 billion, up 0.6% YoY, forecast $25.18 billion

  • Gross Profit Margin: 26.3% vs. 25.7% a year ago, forecast 26.52%

  • Increased inventory: -16% YoY vs -5.1% Forecast

  • Diluted EPS: -6.2% y/y at $2.05, forecast at $1.80

CHICAGO, IL - NOVEMBER 16: Shopping carts line up outside a Target store in Chicago, Illinois on November 16, 2022. Shares of Target plunged today after the company reported a 52% decline in earnings in the third quarter.  (Photo Credit: Scott Olson/Getty Images)

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

What else caught our attention

  • Inventories were down 16% year-over-year, driven by a 25% drop in inventory in discretionary categories such as apparel and home goods.

  • Digital comparable sales decreased 3.4% compared with a 3.2% increase in the prior-year period.

  • After three consecutive quarters of failure, it beat Wall Street earnings forecasts for the second straight quarter.

  • Second-quarter earnings per share are expected to be in the range of $1.30 to $1.70, compared to expectations of $1.96.

  • Full-year earnings per share are expected to be in the range of $7.75 to $8.75 (repeated), versus the $8.36 forecast.

Target’s pre-earnings vibe

  • Year-to-date stock performance: Target +5.8%, S&P 500 +7.4%, Walmart +5.7%.

  • One year stock performance: Target -28.2%, S&P 500 +3%, Walmart +2%.

  • Bank of America: “We maintain a Neutral rating as we believe Target’s strong omnichannel positioning, 10-year exposure in discount stores, and valuable multi-category assortment will be overshadowed by discretionary pressures.” Analyst Robert Ormes.

  • Jeffries: “The target is now trading at 14.9x in 2024, which is 2.5x below its historical average. We believe the target is undervalued at this multiple and has potential upside as fundamentals improve.” – Analyst Corey Tarlow.

Brian Sotzi Executive editor at Yahoo Finance. Follow Sotzi on Twitter @BrianSozzi and further LinkedIn. Bank Crisis Tips? Email

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