Goal On Wednesday, it reported quarterly earnings that were well below Wall Street expectations, as the retailer dealt with exorbitant shipping costs, lower discounts and lower-than-expected sales of discretionary items from TVs to bikes.
Shares fell about 22% in pre-market trading.
Here’s what Target said for the first quarter of the fiscal year ending April 30, compared to Refinitiv’s consensus estimate:
- Earnings per share: $2.19, adjusted for $3.07.
- Revenue: $25.17 billion vs. $24.49 billion forecast
The national retailer, known for its cheap, stylish brands of clothing, home décor and more, Wraps Especially high sales period. A year ago, shoppers had extra dollars in their pockets from stimulus checks and reflected a sense of optimism with their purchases when they got their first Covid-19 vaccines.
Sales have actually grown compared to that period last year. Comparable sales, a key metric that tracks sales in stores that have been open for at least 13 months and online, grew 3.3% in the first quarter. That’s on top of a 23% increase in comparable sales in the same quarter last year and is above Wall Street expectations of 0.8%, according to StreetAccount estimates. At Target’s stores and website, traffic was up 3.9%.
However, CEO Brian Cornell said the company missed the target because its gains were “combined with extraordinarily high costs”.
“While we saw healthy earnings growth during the quarter, we were less profitable than we expected or intended to achieve over time,” he said in a call with reporters.
Among the challenges, Target said earnings were affected by inventory that arrived too early and too late, compensation and the number of employees that rose at distribution centers, and a mix of merchandise sales that looked different than before.
Target results are reversed WalmartQuarterly earnings performance. Walmart said Tuesday that it too It missed profits, which also indicates higher inventory and multiple cost pressures. Walmart shares fell more than 11% on Tuesday and touched a 52-week low.
Target reiterated its revenue forecast, which calls for mid-single-digit growth this year and beyond. No earnings per share estimate was provided.
Target’s net income for the quarter fell to $1.01 billion, or $2.16 per share, from $2.1 billion, or $4.17 per share, a year ago. Excluding items, the retailer earned $2.19 per share, 88 cents lower than the $3.07 analysts polled by Refinitiv had expected.
Adjusted earnings per share are down sharply — down nearly 41% from the same period last year.
Total revenue rose to $25.17 billion from $24.20 billion last year, above analysts’ expectations of $24.49 billion.
While Target and Walmart both missed profit expectations by wide margins, they differed in their US consumer descriptions.
Walmart Chief Financial Officer Brett Bigs told CNBC that the large retailer has seen some budget-strapped customers trade into the brand’s deli meat store and buy a half gallon of milk instead of a full gallon. Others, he said, are looking for new game consoles and courtyard sets.
Meanwhile, Target CEO Brian Cornell said on a media call that the company sees a healthy consumer, but one who lives — and spends — differently while resuming some pre-pandemic habits.
For example, Cornell said toy sales were prominent in the first quarter and grew in single-digits highs as families resumed larger kids’ birthday parties. He said baggage sales are up more than 50%.
On the other hand, sales of items such as televisions, kitchen utensils and bicycles declined as consumers shifted their spending toward experience-based purchases such as booking flights and purchasing gift cards for restaurants.
But Cornell warned that cost pressures “will continue for the near term,” stressing that some of them are out of the company’s control. One such factor is the price of gas, which hit a national average of $4,523 a gallon on Tuesday, according to the AAA.
However, he said, it will continue to invest in the business, opening new stores, and said Target’s long-term bright path remains the same.
With inflation soaring to its highest level in nearly four decades, CFO Michael Vedelk said on a call with reporters that Target will focus on delivering value, even if that means absorbing some of the costs. The price hike, he said, “remains the last lever we pull.”
“We’ve gained a lot of confidence over the past several years with the investments we’ve made in pricing, and we’re not about to trade that in the current environment,” he said.
As of Tuesday’s close, Target shares are down about 7% so far this year. Shares closed at $215.28 on Tuesday, bringing the company’s market capitalization to $99.82.
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