Target Earnings, The Hidden Issues

Target reported earnings yesterday and markets weren’t expecting great numbers from the company. The numbers reported, however, confirmed some of the fears investors were having. This did not specifically mean Target executed poorly, quite the opposite in my opinion, but as we see the stock down 8%, let’s dive into the earnings and find out why that is.

- What did analysts expect from Target?

Analysts were looking for Target to report EPS of $2.06 on revenues of $24.52 billion. These numbers meant that Target would see barely any growth from the year-ago quarter.

- What were the Target growth numbers?

Target reported EPS of $2.03, missing the expectations but also coming in slightly lower than EPS from the year-ago quarter. This came from revenues of $24.53 billion, a slight beat of expectations, as well as a slight increase from last year, however, this mostly came from, new store openings as comparable sales were down 3.7% Year-Over-Year. The average ticket per customer was also slightly down.

- So what do I think of the numbers?

The numbers indicate a tougher overall market for retail and consumers going down the ladder as Walmart increased its earnings. Target played into this by lowering the prices of about 1500 products, and is going to lower the prices of another 5000 products this summer. What was positive from these earnings is that they explained that operations are improving towards pre-pandemic levels as they are increasing the amount of on-time, and complete shipments. This is something that is still disturbed from covid demand and restrictions on the business. Target also announced a modest increase in the dividend in order to keep the streak of increasing dividends, and explained that they will focus on increasing the bottom line in future quarters as this has stayed behind from top-line growth when compared to 2019, the year prior to covid.

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