Target Investor Relations: Retailer Smashes Earnings, Slashes Full-Year Guidance
Key takeaways
- Target smashed expectations on earnings and cut down its inventory levels in second quarter
- However, the retailer has cut its full-year guidance after a sales decline for the first time in years
- Target shares closed 3% up on Wednesday
It was a gloomy earnings beat from retail giant Target, as the chain cut its full-year forecast after missing sales expectations in the second quarter. Even if a recession isn’t on the way, consumer spending cutbacks are leaving retail chains struggling to cope. Despite the mixed bag, Wall Street chose to look at the upside. Here’s the latest.
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What happened with Target’s Q2 results?
It was a real mixed bag for Target, so we’ll start off with the good news. The retailer reported earnings per share at $1.80, compared with the $1.43 forecast. Inventory levels were also down 17% compared to last year after the retailer warned of bloated stock.
Onto the not-so-good stuff: sales fell 4.9% from the same time last year to $24.8 billion, which is the first decline in sales for Target in four years. As a result, Target has slashed its full-year guidance to predicting a full-year profit between $7 and $8 a share, compared with the earlier forecast of $7.75 to $8.75.
The company said revenue suffered in the second quarter from launching its Pride collection, which received conservative backlash from shoppers. The boycott led to a 4.8% decline in footfall for Target stores, compared to 0.9% up last year.
How did Wall Street take the news?
Target shares jumped as high as 10% in premarket trading on Wednesday, eventually closing the trading session 3% higher. As expectations were low, Target surprised on the upside in the right areas, like earnings and improved profit margins, that kept investors happy.
However, it’s not been a great year for the stock so far as consumer spending has been battered by high inflation and interest rate increases. The share price has declined over 15% since the start of 2023.
It was happy days for Walmart investors on Wednesday, though. The stock gained 12% as anticipation ramped up for its Q2 earnings, which are expected to be better than Target’s.
The bottom line
Despite the gloomy full-year forecast, the stellar earnings performance was enough to lift Target stock and keep investors happy. The Pride controversy was a one-off impact on the revenue, so it’ll be interesting to see how the third quarter compares in the coming months.
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