Target's Sales Decline And EPS Miss: Why Analysts Remain Optimistic

Target Corp TGT reported a first-quarter FY24 sales decline of 3.1% year-on-year to $24.531 billion and a comparable sales decline of 3.7%.

The company posted an adjusted EPS of $2.03, missing the consensus estimate of $2.06. The following are the reactions of analysts after the earnings.

BofA Securities – Reiterates Buy, price target of $190.00

Analyst Robert F. Ohmes said the miss versus consensus in the adjusted EPS was driven by higher selling, general and administrative costs as a percentage of sales, as gross margin of 27.7% came in ahead. 

The same-store sales decline included a 1.9% decline in both traffic & ticket, noted the analyst.

While discretionary sales remained soft, sales trends continued to improve sequentially, led by an improvement of 4% in apparel versus F4Q24, asserted the analyst.

Also, digitally originated comp sales increased +1.4%, a positive inflection versus five consecutive quarters of digital declines, said the analyst.

While near-term sales remain pressured, the analyst notes TGT’s focus on value positions it well for share gains going forward.

Telsey Advisory Group – Reiterates Outperform, price target of $195.00

Analyst Joseph Feldman said that broadly, pressure remained on discretionary categories, partly offset by outperformance in beauty.

The analyst expects to see the comp return to positive territory in 2Q24 and ahead.

Longer term, the analyst said Target should gain market share, supported by ongoing strategies of price investments, private brands, new stores and remodels, fulfillment/supply chain enhancements, loyalty programs, digital, and Target + marketplace.

Target stock has lost more than 5% in the last 12 months. Investors can gain exposure to the stock via Consumer Staples Select Sector SPDR Fund XLP and Vanguard Consumer Staples ETF VDC.

Price Action: TGT shares are trading lower by 7.45% at $144.18 at the last check Wednesday.

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