Discretionary Spending Slows: How It Impacts Target's Near-Term Gross Margins

Credit Suisse analyst Karen Short reiterated a Neutral rating on the shares of Target Corp TGT with a price target of $170.
TGT is scheduled to report its 1Q23 earnings on Wednesday, May 17, before the market opens.
The analyst thinks TGT's stock price performance since its investor community meeting on February 28 reflects the mixed investor sentiment on the stock.
The stock was down 8% compared to the S&P 500's gain of about 4% in the above-mentioned period.
The analyst believes the concern on the stock largely comes from the uncertainty associated with the extent of TGT's ability to recapture its gross/operating margins in the near term as it laps significant declines in margins.
Also the company has more muted sales performance relative to its large competitors, specifically Walmart Inc WMT, which, in the analyst's view, is a function of its higher exposure to discretionary categories.
Some investors believe WMT's market share regains, given its sales outperformance as of late, and the volatile macro backdrop, are among the reasons to be more constructive on WMT rather than TGT in the current environment, opined the analyst.
The analyst commented that consumer spending in discretionary categories seemed to have slowed in March and April, due to fears related to the economy and banking industry, and inclement weather, which could have hurt TGT's sales.
Price Action: TGT shares are trading higher by 1.40% at $160.21 on the last check Monday.