Hitting The Bullseye: How Target's Q1 Earnings Outshine Analyst Expectations

  • Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating on the shares of Target Corp TGT with a price target of $185.
  • Target reported 1Q23 EPS of $2.05, ahead of the analyst’s estimate of $1.90 and the FactSet consensus (FS) of $1.77, driven by better-than-anticipated operating margin.
  • In 1Q23, total sales increased 0.6% to $25.3 billion, with comparable sales remaining flat.
  • By category, the company saw ongoing strength in food, essentials, and beauty, as well as Valentine’s Day and Easter assortments, partly offset by softness in select discretionary categories.
  • Inventory declined 16.4% vs. sales growth of 0.6%, primarily due to the reduction of more than 25% in discretionary categories, partially offset by higher inventory in frequency categories, noted the analyst.
  • The analyst opined that the pressure on sales and profits mirrored by gloomy guidance likely reflects the impact of macro pressures on spending and higher shrink.
  • The analyst believes Target is executing well in a tough economic environment and beyond near-term challenges, the company should gain market share in the medium term, supported by ongoing strategies.
  • Price Action: TGT shares are trading higher by 2.84% at $161.36 on the last check Wednesday.
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