Target Corporation (NYSE:TGT) fell sharply in early trading on Wednesday after the retailer pointed to sales declines in some discretionary categories.
The Minneapolis-based retail giant reported comparable sales decreased 3.7% during the quarter to match the consensus expectation of analysts. Digital comparable sales were up 1.4% during the quarter. Total revenue of $24.53 billion was 3.1 percent lower than last year, reflecting a total sales decline of 3.2 percent and a 3.9 percent increase in other revenue. The revenue tally was in line with the consensus estimate. The beauty category was an outperformer during the quarter.
Target’s (TGT) operating margin rate was 5.3% vs. 5.2% a year ago. Gross margin rate was 27.7% of sales, vs. 26.3% a year ago. The gross margin improvement reflected the net impact of merchandising activities, including cost improvements that more than offset higher promotional markdown rates, combined with favorable category mix and lower book to physical inventory adjustments as compared to the prior year.
Target (TGT) beat estimates on the EPS line, with a tally of $2.03 recorded, compared to $2.06 consensus and $2.05 a year ago. Adjusted EBITDA was $2.04B vs. $1.97B consensus and $2.02B a year ago.
The retailer’s inventory level at the end of Q1 was 7% lower than last year, even as it saw higher in-stock levels than a year ago.
Target (TGT) did not repurchase any stock in the quarter. At the end of the quarter, TGT had approximately $9.7B of remaining capacity under the repurchase program approved by the board. For the trailing twelve months through first quarter 2024, the after-tax return on invested capital was 15.4%, compared with 11.4% for the trailing twelve months through first quarter 2023
CEO statement: “Our topline performance improved for the third consecutive quarter, with growth in our digital business led by strength in our same-day fulfillment services. Consumers continue to respond to the newness and value that we offer across our shopping experience, and we’re pleased with early results from the relaunch of Target Circle. Looking ahead, our team will deliver for our guests through lower prices, a seasonally relevant assortment, ease and convenience, as we keep investing in our strategy and efficiency initiatives to get back to growth and deliver on our longer-term financial goals.”
Looking ahead, Target (TGT) expects Q2 comparable sales growth to be flat to up 2%. Q2 adjusted EPS of $1.95 to $2.35 is anticipated, compared to the consensus mark of $2.20, and full-year EPS is seen landing in a range of $8.60 to $8.90 vs. $9.49 consensus.
Shares of Target (TGT) fell 7.22% during the premarket session. Walmart (WMT) shed 0.66%, and Costco (COST) dropped 0.65%. Dollar Tree (DLTR) and Dollar General (DG) were both also slightly lower after the Target (TGT) update.