Target Slides As Inflation Continues To Impact Sales, Guidance Disappoints

Target (TGT) shares tumbled in premarket trading Wednesday despite the retailer reporting a small earnings beat for the first quarter of fiscal 2024, as inflation and lower discretionary spending continue to weigh on sales.

Target reported total revenue in line with analyst estimates at $24.53 billion, down 3% from last year’s first-quarter mark of $25.32 billion. Profit ticked lower to $942 million, or $2.03 per share, from last year’s $950 million, or $2.05 per share, but above expectations of $930.3 million, or $2.00 per share.

The company said it is still feeling the impact of shoppers lowering their discretionary spending, but added that “discretionary sales trends continued to improve” from previous quarters.

In-person shopping also took a hit, with comparable store sales falling by 4.8% from last year, but Target said its digital business is still growing, with 13% year-over-year improvement in its curbside pickup sales.

For the current quarter and full fiscal year, Target projects that comparable store sales will range from flat to 2% yearly growth, with second-quarter diluted earnings per share (EPS) expected in a range from $1.95 to $2.35, with the midpoint below the $2.19 analysts currently project. For the full year, Target projects EPS between $8.60 to $9.60, with the midpoint also below the $9.37 analysts expect.

Target Circle Relaunch, Lower Price Initiative

In April, Target launched a revamped version of its Target Circle membership program, adding a paid tier that would give members access to benefits like free same-day delivery as the retailer works to compete with other retail and e-commerce giants like Amazon (AMZN) and Walmart (WMT).

Target said it added 1 million new members in the first quarter, but did not disclose how many of those new members joined Target Circle’s longstanding free program or subscribed to the new Target Circle 360 subscription.

Earlier this week, Target announced another method of competing with lower-cost retailers like Walmart with its plan to cut prices on around 5,000 of its most-ordered items over the summer.

Shares fell by 8% an hour before the opening bell Wednesday. They are up 9% this year to $155.78 through Tuesday’s close.