Target gave cautious full-year guidance early Wednesday after crushing earnings estimates for the second quarter. Target stock gapped higher, then trimmed gains.
Notably, Target reported a long-awaited sales upswing. In Q2, Target's same-store sales rose for the first time since Q4 2022.
In an interview with CNBC on Wednesday, Target CEO Brian Cornell addressed accusations on the election campaign trail that grocers are unfairly inflating prices. Last week, Democratic presidential candidate and current Vice President Kamala Harris proposed the first-ever federal ban on "corporate price gouging" in the food and grocery industries.
"We are in a penny business," Cornell retorted on Wednesday, while noting thin profit margins in the retail industry. He added that retailers have to be responsive to customers or risk losing business.
Target Earnings Surge, Outlook Raised
In Q2, Target earnings surged 43% to $2.57 a share, with revenue up 2.7% to $25.45 billion. Same-store sales climbed 2%, the first increase since Q4 2022.
Analysts had expected Target earnings of $2.18 per share, according to FactSet. Revenue was seen rebounding 1.6% to $25.177 billion, with same-store sales, a key retail metric, up 1.1%.
Target on Tuesday raised its full-year EPS target to $9-$9.70, up from its prior view for $8.60-$9.60. Wall Street was expecting $9.23, FactSet shows.
The big-box retailer said Tuesday that it expects 2024 same-store sales (SSS) to be on the lower end of its prior guidance for flat to up 2%. Analysts were expecting a 0.1% SSS gain in 2024, FactSet shows. Same-store sales, or comparable sales, strip out the impact of store openings and closures.
Target Stock Gaps Up On Earnings
Shares vaulted 11.2% to 159.25 in huge volume on the stock market today, gapping above the 50-day and 200-day moving averages. But Target stock pared intraday gains as much as 16%, closing near the bottom of the day's range.
Target is building the right side of a consolidation going back to late March with a 181.86 buy point.
Amazon, Walmart: Shoppers Seek Value, Deals
The Target earnings report comes after the retailer said in May that it plans to drop prices on 5,000 everyday items over the summer.
Rival retailer Walmart issued an earnings beat-and-raise report last Thursday. Walmart is said to have attracted some Target shoppers looking for greater value amid high inflation. Amazon said on Aug. 1 that its customers continue to trade down and seek deals.
Target's pricing moves reflect those pressures. They could help sales to "inflect" in the second quarter along with easier comparisons, Bank of America analyst Robert Ohmes said in a Monday note to clients.
"We believe Target's heightened focus on value positions it well for share gains going forward," the analyst wrote. He maintained a buy rating on Target stock, with a price objective of $190.
Year to date, TGT stock is now up nearly 12%, thanks to Wednesday's earnings gap-up. Through Tuesday, shares were barely higher for 2024 after tumbling since April.
