Target, the Minneapolis-based retailer, is set to report its fiscal first-quarter earnings on Wednesday. This comes just days after the company announced its plans to cut prices on thousands of groceries and everyday items. Target has set low expectations for the year ahead, with projected comparable sales ranging from flat to up 2% and adjusted earnings per share ranging from $8.60 to $9.60 for the full year.
Wall Street analysts, surveyed by LSEG, expect Target’s earnings per share to be $2.06 and revenue to be $24.52 billion. If these projections hold, it would indicate a drop in sales compared to the year-ago quarter, which saw revenue at $25.32 billion.
Like many other retailers, Target has been facing challenges due to consumers being more cautious with their spending on non-essential items. This trend, known as “price fatigue,” has impacted the sales of clothing, home goods, and discretionary items. Target, in particular, has been affected by this trend because it relies less on food sales compared to its rival Walmart. While Walmart draws about 60% of its U.S. sales from groceries, Target only relies on food for roughly 20% of its sales.
Inflation has also played a role in shaping consumer behavior. Although inflation slightly cooled in April, the consumer price index still showed a year-over-year increase of 3.4%. This means that the cost of goods and services at the cash register has risen. As a result, consumers may be more hesitant to spend on non-essential items.
Walmart, on the other hand, reported better-than-expected earnings and revenue last week. The company experienced double-digit e-commerce growth and stated that it is gaining market share from higher-income shoppers. Walmart’s Chief Financial Officer, John David Rainey, also noted that customers are turning to their grocery aisles for cheaper meal options as fast food prices continue to rise. It’s possible that some of Walmart’s new or frequent shoppers may have shifted from Target.
Target has acknowledged the challenges posed by inflation and competition from discounters such as Walmart and Aldi. To address these concerns, Target has focused on price cuts, particularly on grocery staples like milk, meat, bread, fruit, and vegetables. Additionally, discounts are being offered on essential household items like paper towels and diapers.
It is worth noting that as of Tuesday’s close, shares of Target are trading at $TK, bringing its market value to $TK. However, Target’s stock performance is lagging/leading the S&P 500 by TK%.
