Categories Analysis, Retail

Target Corp. (TGT) bets on strong fundamentals to stay resilient

Target Corporation (NYSE: TGT) lost significant market value this week after the department store chain reported weak holiday sales and lowered its outlook, spurring a stock selloff. While there are concerns about its future, the stock is likely to recover from the temporary slump and get back on track before the next earnings report, which is expected next month.

Related: Target Q3 2019 Earnings Conference Call Transcript

After staying on an upward trajectory for several months, the stock had hit a record high in the final weeks of last year. However, it entered 2020 on a negative note and lost 8% since then. Analysts’ consensus price target of $138 represents a 19% upside, which also justifies the buy rating. The stock traded lower during Thursday’s regular session.

The holiday debacle was quite unexpected as the market has been quite bullish about the company’s prospects this year. The fact that high-margin categories such as consumer essentials and apparels did well this season gives hope that things would change for the better in the coming weeks. Meanwhile, the gross margin was in line with the normal trend. It needs to be noted that most retailers recorded below-average sales this season.

Week Outlook

During the early part of the holiday season, comprising the months of November and December, Target’s comparable sales increase by 1.4%. The outcome did not go well with the market, which was expecting a better performance. The slowdown is attributable to weakness in the main holiday categories, which more than offset the higher sales in the other areas.

Also see: Why Kohl’s Corp. needs to focus on ailing segments?

During the period, there was a 19% growth in comparable digital sales. For the whole of the fourth quarter, ending January 2020, the management forecasts comparable-store sales growth of 1.4%, which is far below the earlier forecast. The outlook for full-year comparable sales is 3%.

Positive Q3 Comps

In the third quarter, earnings increased 25% annually to $1.36 per share even as revenues moved up 5% to $18.7 billion. The results benefited from positive same-store sales amid strong store traffic and topped Wall Street’s prediction.

Resilience

Target has stayed unaffected by the sweeping change the sector is witnessing – mainly the shift to technology-enabled business model that resulted in the dominance of e-commerce firms like Amazon (AMZN) in the retail space.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text

Most Popular

Tyson Foods (TSN) Q1 2023 Earnings: Key financials and quarterly highlights

Tyson Foods Inc. (NYSE: TSN) reported first quarter 2023 earnings results today. Sales rose 2.5% year-over-year to $13.2 billion. Net income attributable to Tyson was $316 million, or $0.88 per

After weak start to 2023, Apple (AAPL) sees some bright spots

Apple Inc. (NASDAQ: AAPL) this week reported its first revenue decline in more than three years, even as the high inflation continues to squeeze customers’ spending power. Sales of the

Earnings: Qualcomm (QCOM) Q1 profit falls on lower revenues

Chipmaker Qualcomm, Inc. (NASDAQ: QCOM) has reported lower earnings and revenues for the first quarter of 2023. The company also provided guidance for the second quarter of 2023. At $9.5

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top