Target, the popular retail chain, is set to report its fiscal second-quarter earnings before the market opens on Wednesday. The company has been grappling with challenges such as weaker demand for discretionary merchandise and backlash over its Pride collection.
In recent years, Target has seen significant growth in sales, particularly during the Covid-19 pandemic. However, the past year proved to be disappointing for the retailer, with profits taking a hit due to excess inventory, higher markdowns, and a decrease in demand for discretionary items.
Late last month, Target informed investors that its sales trends had weakened in May. As a result, the company expects a low single-digit decrease in comparable sales for the second quarter. For the full fiscal year, Target anticipates that comparable sales will range from a low single-digit decline to a low single-digit increase.
Analysts, according to Refinitiv consensus estimates, are expecting earnings per share of $1.39 and revenue of $25.16 billion for the fiscal second quarter.
Target faces the challenge of disappointing investors this quarter, as it relies heavily on categories like clothing, home goods, and electronics – items that consumers have been purchasing less frequently due to increased spending on food and necessities. Groceries contribute to only about 20% of Target’s annual revenue, unlike its rival, Walmart, which has a more diverse product range.
The retailer also faced criticism in May over its Pride month merchandise collection. After receiving threats to its employees, Target removed some items from the collection, drawing both opposition and questioning from critics. However, there are other positive retail metrics that may benefit Target, including better-than-expected retail sales in July and Amazon’s strong sales performance in its most recent quarter.
Target’s stock closed at $125.05 on Tuesday and has experienced a 16% drop year to date, significantly trailing behind the 15% gain of the S&P 500 index.
As the story continues to develop, it is worth checking back for updates on Target’s fiscal second-quarter earnings and its strategies to overcome the challenges it currently faces.