Target Q1 Earnings Preview: Could Price Cuts Overshadow Results? 'Competitive Dynamics In TGT's Markets,' Analyst Says

Target Corporation TGT is set to report first-quarter (Q1) financial results before the market opens on Wednesday, Mary 22.

Analysts expect the retail giant to report Q1 revenue of $24.51 billion, according to estimates from Benzinga Pro.

The Minneapolis-based company reported revenue of $25.32 billion in last year's first quarter. Target has beaten analysts' revenue estimates in two straight quarters and seven of the last 10 quarters.

Analysts expect earnings per share of $2.02 in Q1, compared to last year's Q1 earnings per share of $2.05. The company has beaten analysts' earnings per share estimates in five straight quarters and seven of the last 10 quarters.

Guidance from Target calls for earnings per share in a range of $1.70 to $2.10 and comparable sales to decline between 3% and 5%.

For the full fiscal year, Target sees earnings per share coming in a range of $8.60 to $9.60. The company's guidance calls for full-year comparable sales to be 0% to +2%.

What Analysts Are Saying: A recent move by Target to lower prices on 5,000 items in stores is a key going forward, Oppenheimer analyst Rupesh Parikh said.

The analyst, who has an Outperform rating and $200 price target, said the move shows Target being more aggressive on pricing.

"These appear, to us, to be driven by competitive dynamics in TGT's markets vs. proactive efforts to gain share in certain categories," Parikh said.

Target announced Monday that it was lowering prices on national brand products and its own in-house brands across popular categories. The analyst tracked a basket of products that included butter, Prime drinks, frozen pizza, Goldfish crackers, wipes, sunscreen, laundry detergent, cat good and more. Under the new prices, the basket had a cost of $58.78 versus an old cost of $64.68, representing savings of 9%.

The view on Target in the first quarter is tempered given "discretionary category challenges,” Parikh said. "We continue to forecast a Q1 comp decline of 4% to 5%, below a Street forecast figure of -3.7%."

The analyst said Target remains a "top pick" and the stock dipping could be an area to take advantage of by investors.

Data from Placer.ai recently showed that visits to Target in the first quarter were up 3.5% year-over-year. The visit growth could show strength with analysts and the company predicting comparable sales would decline in the quarter.

Here are other analyst ratings on Target and their price targets:

• Citigroup: Upgraded from Neutral to Buy, no price target
• Evercore ISI: In-Line rating, lowered price target from $183 to $180
• Jefferies: Buy rating, raised price target from $195 to $205

Key Items to Watch: The price cuts as mentioned by Parikh above could be one of the most watched items from Target by analyst, investors and consumers.

The price cuts cover popular products and could also see Target further emphasizing its in-house brands over national brands with lower costs.

"We know consumers are feeling pressured to make the most of their budget and Target is here to help them save more," Target executive vice president Rick Gomez said.

In Target's announcement of the price cuts, the company also highlighted how Target Circle Card users can save even more thanks to the extra 5% savings offered. The new price cuts could be another way to help promote the free-to-join membership program.

Outside of the Target Circle Card, Target announced the Target Circle 360 paid membership program in March with a planned launch in April. Investors and analysts will be looking for an early update on interest in the program and how it could impact future quarterly results.

Other areas of focus could be on the advertising business, which hit $1.5 billion in 2023, and plans to improve self-checkouts given a rise of theft risks for retailers offering the convenience.

TGT Price Action: Target shares trade at $155.35 versus a 52-week trading range of $102.93 to $181.86. Target shares are up 2.1% over the last year and up 8.9% year-to-date in 2024.  

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