Target (TGT), the nation’s seventh-largest retailer by revenue, will likely say earnings fell 20% in the first quarter amid a slowdown in comparable store sales and discretionary spending.
- Net income is forecast at $802 million, or $1.72 per share, which is down 20.5% from the year-ago quarter.
- Revenues are projected at $25.3 billion, up just 0.6% year-over-year on fewer transactions and retail traffic at its stores.
- A slowdown in discretionary spending likely weighed on comparable store sales, which are expected to rise less than 1% on the year, and earnings.
Net income is forecast at $802 million down from about $1 billion from the year-ago quarter while earnings per share (EPS) is projected at $1.72 per share, according to estimates compiled by Visible Alpha. Net sales are projected at $25.3 billion, up just 0.6% year-over-year on smaller average transactions. Comparable store sales, also known as same-store sales, probably rose less than 1% year-over-year to $24.89 billion. Target reports first-quarter earnings before markets open Wednesday.
A slowdown in discretionary spending likely weighed on the retailer’s earnings in the most recent quarter. U.S. retail sales fell for two consecutive months in February and March, weighed down by rising interest rates, persistently high inflation, and concerns about a recession.
Target's food and beverages segment is expected to hold up best, growing 1.5% year-over-year, while hardline sales, including electronics and appliances, are forecast to drop for a fifth straight quarter.
Consumers are also increasingly relying on credit. Credit card debt totaled $986 billion in the first quarter, unchanged from the previous quarter, according to the Federal Reserve Bank of New York. This defies seasonal trends, as credit card debt typically falls in the first quarter of the year as households pay off their credit cards after the holiday shopping season.
|Target Key Metrics|
|Q1 FY 2024 (Projected)||Q1 FY 2023||Q1 FY 2022|
|Comparable Store Sales ($M)||24,889||24,667||23,807|
|Net Income ($M)||802||1,009||2,097|
|Earnings Per Share ($)||1.72||2.16||4.17|
Retailers are adjusting accordingly. Major U.S. retailers opened 2,570 new stores in the first quarter, down sharply from 4,400 openings in the corresponding quarter of 2022, according to the National Retail Federation (NRF). Meanwhile, they announced plans to close 1,760 stores, nearly three times the 625 closures announced during last year’s first quarter.
Target shares are up roughly 7% so far this year, compared with a 15% gain for the broader S&P 500 consumer discretionary sector over the same period.
National Retail Federation. "Top 100 Retailers 2022 List."
Visible Alpha. "Financial Data."
New York Federal Reserve Bank. "Household Debt and Credit Report (Q1 2023)."
National Retail Federation. "Store Closing Announcements Jump as Discretionary Spending Slows."