Walmart (World Trade Center) is set to capture the target (target) is America's most popular big box retailer. This Wednesday, May 22nd, Target released its less than stellar first quarter earnings report. Brooke DiPalma of Yahoo Finance explains: “It's a tale of two retailers: Target fell 3.7%. Walmart surprised the Street last week with same-store sales up 3.8%.”
Target's high-quality products, but high prices, seem to put them out of reach of the average Main Street dweller, who has turned his back on the red-and-white retail giant and believes he'll save money by shopping at Walmart. Brian Sozzi of Yahoo Finance reiterates, “No matter where you look this quarter for Target, it was a disaster from top to bottom. They point out that inflation is starting to slow, but we're not seeing a corresponding improvement in sales.”
Inflation appears to be the main culprit behind Target's slump in sales. In response to this continued decline in sales, the company has announced price cuts on around 5,000 products, with further cuts planned for the summer. Michael Baker, managing director at DA Davidson, sees this as a bullish move, saying “The key right now is to attract customers, get foot traffic back and regain market share.” Target may be down, but it's far from lost.
Consumers may not have turned their back on Target; they just can't afford it. “Target has made its name selling fun-to-have products. That's not what consumers are buying right now!” said former Toys R Us CEO Jerry Storch. Despite its current struggles, Target has proven itself to be a quality company with “tremendous consumer brand equity,” and in its 2024 earnings call, the company said, “Consumers still love to shop there, so I think there's a lot of work to be done. It's just going to take time.”
This post was written by Noah Chadwick
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Video Transcript
On Wednesday, Everyone Target is scheduled to release its latest earnings report.
Brad's target revenue is indeed scheduled for the first quarter.
Analysts are expecting earnings per share of 205 on revenue heading towards support.
The stock has risen about 10% this year.
Opinion among Wall Street financial analysts is fairly divided, with 20 rating it a buy, 15 rating it a hold, and 1 rating it a sell, making it a pretty spot-on stock.
Well, I think the benefit for Target right now is that expectations are very low.
Well, we expect median sales to decline 4%.
That means targets aren't very high, sales are disappointing and suggest a crack in consumer spirits, and Chief Executive Brian Cornell has said inflation is putting pressure on customers' wallets — very similar to warnings heard this earnings season from Home Depot, Lowe's and even some fast-food companies.
It's a tale of two retailers that were targeting a decline of about 3.7%.
Now, last week, same source sales from Walmart impressed Tree with a 3.8% increase wherever you look this Target quarter, which was awful from top to bottom, and I was surprised to see Target reiterating their guidance on that conference call, I think it was Brian Cornell and the CFO and the chief merchandising officer.
They noted that while inflation has started to slow, they have not seen a corresponding improvement in sales.
And that's a big problem.
The near-term momentum has to go to Walmart, which is currently thought of more as a discretionary retailer.
We argue that both companies will continue to outperform given their relative positioning and valuations. Target's price cuts on 5,000 items are either bullish or bearish for the company.
We see that as a positive thing. I think what's important for them right now is to get customers.
Yeah, and get your traffic back and regain your market share.
So we think that's the right thing to do and we think we should repay, pay off with a positive issue later this year.
I think consumers, to some extent, have been snowed in for a while now.
Oddly enough, this has been masked by inflation.
So essentially, consumers are spending more and getting less, and they know that, and our goal is to be the retailer that's known for those fun products, but those aren't the products that consumers are buying right now.
But they are a huge retailer.
They have huge consumer brand equity.
People still love to shop there.
So I think they have a lot of work to do.
So I'm not going to tag them, but it'll be a while.
