Target's Struggles: Inflation and Persistent Buyer Interest
Friday, Jan 10, 2025 4:46 pm ET
6min read Target (TGT) shares tumbled 20% in premarket trading Wednesday, following the release of the retailer's third-quarter earnings report. The company missed estimates for sales and profit, with revenue of $25.67 billion, up from $25.40 billion a year ago but below the $25.89 billion analysts expected. Net income was $854 million, or $1.85 per share, down from $971 million and $2.10 per share a year ago, also missing analyst estimates of $1.05 billion and $2.28 per share.
Target CEO Brian Cornell attributed the company's struggles to a "volatile operating environment" and "some unique challenges and cost pressures that impacted our bottom-line performance." The retailer also lowered its expected full-year EPS outlook to a range of $8.30 to $8.90, down from $9.00 to $9.70 last quarter. Its fourth-quarter EPS estimate of $1.85 to $2.45 is below the $2.66 consensus estimate.
Target's comparable store sales declined by 1.9%, despite a 10.8% increase in comparable digital sales. The company has been working to regain market share after acknowledging earlier this year that higher prices had negatively impacted its sales. In response, Target lowered prices on thousands of popular products over the summer and announced a schedule of daily and weekly sales through the holiday season, including a three-day "Early Black Friday" sale.
Rival Walmart (WMT) beat estimates in its earnings report Tuesday, suggesting that Target's struggles may be specific to the company. Other retailers like TJX Companies (TJX), BJ's Wholesale Club (BJ), and others are expected to provide further insight into the health and behaviors of the U.S. consumer ahead of the holiday shopping season.
Despite Target's disappointing performance, Jim Cramer, host of CNBC's "Mad Money," was surprised by the persistent buyer interest in the stock. He noted that Target's shares, which had gained almost 10% on the year through Tuesday's close, sank 21% to $123.14 after the report was released. This suggests that investors may still see value in the company, despite its recent struggles.
In conclusion, Target's recent performance has been disappointing, with the company missing estimates for sales and profit, and comparable store sales declining by 1.9%. Despite these struggles, Jim Cramer was surprised by the persistent buyer interest in the stock, suggesting that investors may still see value in the company. As the holiday shopping season approaches, Target will need to address its challenges and regain market share to improve its performance.
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