Target's Apparel Performance Provides Optimism, Analyst Favors Top End Of EPS Outlook

JP Morgan analyst Christopher Horvers reiterated the Neutral rating on Target Corporation TGT.

The company reported a 2.8% increase in holiday sales during the November and December period.

The company saw comparable sales rise 2% and solid sales during the Black Friday and Cyber Monday promotions. The increase was fueled by a nearly 3% rise in traffic, positively impacting both in-store and online channels.

According to the analyst, the +2% growth suggests a weather shift from the third quarter and slight consumer improvement.

Horvers writes that the company explained that the +2% growth in November/December and the updated fourth quarter guide were due to the calendar shift, not a change in trends, and no updates were provided for January.

Also Read: Big Banks Continue To Beat Q4 Earnings As Financial ETF Takes A Breather

Additionally, the retailer’s strong apparel performance, despite excess inventory, raises hopes for better-than-expected margins, the analyst notes.

The holiday pre-announce was Target’s first since FY20 and served as a sales update, without changing its EPS guidance for the fourth quarter ($1.85 – $2.45) or FY24 ($8.30 – $8.90).

The lack of updated EPS guidance is seen as a sales update, with the existing range being broad. Given historical trends, the analyst sees the higher end of the EPS range is more likely.

The company highlighted strong performance in apparel, boosted by cold weather, and in toys, driven by more accessible prices.

However, it noted that not all discretionary categories saw growth, with electronics remaining flat.

Additionally, management pointed out that the third quarter was not as weak as initially thought due to weather, Horvers adds.

Price Action: TGT shares are trading lower by 1.19% to $132.93 at last check Thursday.

Read now:

• Retail Sales Disappoint, Jobless Claims Rise: Is US Consumer Losing Steam?

Photo via Shutterstock.