News
Desired gains miss the mark as inflation-hit shoppers avoid buying things they don’t really need
Target (TGT) missed the profit mark in the first quarter.
It’s the fault of American families hit by inflation, their executives say.
The “biggest challenges” Target hears from its customers are “inflation in food and household essentials,” president and CEO Brian Cornell said on a call with reporters detailing first-quarter results.
Cornell added that inflation is “putting pressure on the consumer’s wallet.”
Target shares fell 7% in premarket trading on Wednesday in the wake of the results.
He went on to say that sales trends are “normalizing” in categories where inflation has decreased.
The strain weighed most heavily on Target’s bread and butter — brick-and-mortar stores — where traffic and the number of transactions fell in the quarter.
Large supercenters continued to see weak sales in discretionary departments such as household goods.
As a result of the drop in store sales, Target CFO Michael Fiddelke says the company is planning the business “conservatively” for the balance of the year.
To right the ship and close the gap with better-performing rival Walmart (WMT), Target revealed a plan Monday to reduce prices on 5,000 items like milk, meat and bread.
The company has already lowered prices on around 1,500 items and this will continue throughout the summer.
The Earnings Summary
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Liquid sales: -3.1% year over year to $24.5 billion vs. estimates of $24.13 billion
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Gross profit margin: 27.7% versus 26.3% a year ago, versus estimates of 27.4%
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Diluted EPS: -1% year over year to $2.03 versus estimates of $2.05 (guidance: $1.70 to $2.10)
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Comparable Sales: -3.7% year on year (last year it rose 0.7%; Walmart reported a 3.8% gain in the first quarter of 2024) vs estimate of -3.68%
What caught our attention the most
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The stock is down 7% from a year ago.
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The company once again did not repurchase any of its shares in the quarter, despite still having $9.7 billion remaining in prior repurchase authorization.
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Both the number of transactions and the average check size decreased by 1.9% in the quarter.
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Target ended the quarter with nearly $3.6 billion in cash.
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Second-quarter earnings per share are projected to be between $1.95 and $2.35, versus estimates of $2.19.
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Full-year earnings per share are projected between $8.60 and $9.60 (reiteration of previous guidance), versus estimates of $9.43.
One weapon Target doesn’t have in its arsenal is a cloud services company that could finance retail investments like rival Amazon (AMZN). Amazon Web Services CEO Adam Selipsky joined a new episode of the Opening Bid podcast to share what AWS is doing next. Listen below.
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Brian Sozzi is the executive editor of Yahoo Finance. He is also the host of “Opening bid“podcast. Follow Sozzi on Twitter/X @BrianSozzi and so on LinkedIn. Tips on business, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to participate in Yahoo Finance Live? Email Brian Sozzi.
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