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Target Corporation (NYSE:TGT) fell 8.22% in early trading as the retailer’s Q1 earnings report left investors skittish over the near-term path. During the Target (TGT) conference call, CEO Brian Cornell said that shoppers are holding back due to concerns about inflation. Cornell thinks the company’s strategy to lower prices in key categories will pay off over the long term. Wall Street analysts with positive ratings on Target (TGT) remained in the bull camp after the earnings print. The big takeaway is that Target’s (TGT) improvement with margins, shrink, and inventory management may be overlooked due to the headline-grabbing comparable sales declines.
Morgan Stanley noted both traffic and average ticket improved sequentially by about 300 basis points on the 5-year stack, setting the business up for a comparable sales inflection in Q2. However, the firm thinks the EPS bull case for +6% EBIT margins in 2024 and significant EPS upside may be less likely now.
Jefferies highlighted that discretionary category trends continue to improve sequentially, with apparel improving by almost four full points. Analyst Corey Tarlowe said gross margin expanded by 140 basis points, helped by merchandising initiatives.
Bank of America said that while near-term sales remain pressured, the firm thinks Target’s (TGT) focus on value positions it well for share gains going forward.
Shares of Target (TGT) have still outperformed the S&P 500 Index and Walmart (WMT) over the last five years after a giant surge from 2019 to 2021 more than offset the recent share price struggles.