Target (TGT) shares dropped more than 9% in early Wednesday trading, following its latest quarterly earnings, which saw it miss profit expectations.
The retailer reported Q1 EPS of $2.03, $0.03 worse than the analyst estimate of $2.06. Revenue for the quarter came in at $24.53 billion versus the consensus estimate of $24.51 billion.
In comparison to the same quarter last year, Target’s revenue saw a decrease of 3.1%, with comparable sales declining by 3.7%. The company’s digital comparable sales grew by 1.4%, with same-day services expanding nearly 9%, driven by a growth of over 13% in Drive Up.
The company’s first-quarter operating income margin rate was 5.3%, a slight improvement from 5.2% in the previous year.
Brian Cornell, chair and chief executive of Target Corporation (NYSE:), stated, “Our first quarter financial performance was in line with our expectations on both the top and bottom line, tracking the trajectory we outlined for this year and setting up a return to growth in the second quarter.”
He also highlighted the relaunch of the Target Circle loyalty program, which added over 1 million new members in the quarter.
Looking ahead, Target anticipates a 0 to 2 percent increase in comparable sales for the second quarter, with adjusted EPS projected to be between $1.95 and $2.35.
For the full year, the company expects a similar increase in comparable sales and an adjusted EPS range of $8.60 to $9.60.
Following the report, analysts at Jefferies said the top-line results were in line with expectations.
“Q1 comp sales of (3.7%) was in line with expectations and guidance of (3%-5%),” they wrote. “Discretionary category trends continue to improve, with apparel improving by almost 4 points vs. 4Q. GM expanded ~140bps helped by merchandising initiatives. OM of 5.3% was relatively in line with expectations. Meanwhile, inventory declined 7% Y/Y, and in-stocks improved vs. LY.”
Analysts at Roth MKM also stated the first quarter was in line, but they noted that markdown rates re-emerged.
“With: 1) physical comparable store sales little improved throughout the boycott (1Q’24 -4.8% y/y vs. 2Q’23 – 4.3% y/y); 2) continued pressure on discretionary assortment; 3) increased competition for non-discretionary wallet; and 4) possible consumer value seeking tendencies, Target sits
unfavorably,” they wrote.
“Profitability continues to improve y/y, but remains below pre-COVID levels, and the return to positive comp sales and market share gains is uncertain.”
