Target Stock (NYSE:TGT)
Target (NYSE:TGT), the prominent big-box retailer, is anticipated to announce its first quarterly revenue decline in approximately six years when it releases its results on Wednesday. This expected downturn is attributed to a shift in consumer spending preferences away from discretionary goods and towards services.
Numerous analysts, at least 16, have lowered their price targets for Target stock since the start of June. This adjustment reflects the retailer’s reliance on discretionary items and the potential impact of shifting consumer preferences.
In recent months, consumers have directed more of their spending towards services like travel and entertainment, while curbing expenditures on non-essential purchases such as clothing and home goods due to the impact of high inflation.
Edward Jones analyst Brian Yarbrough noted that Target is likely to be more significantly affected than its counterparts due to the substantial portion of its business tied to consumer discretionary products. The retailer’s merchandise is oriented towards discretionary items like clothing, electronics, and beauty products, making it more vulnerable to changing consumer behaviors.
Contextual Insights
Target’s anticipation of bleak second-quarter results was indicated in May as inflation led consumers to reduce spending on non-essential goods.
In alignment with this trend, major payment processors like Mastercard and American Express have observed a slowdown in purchases of high-value items, despite continued robust spending on travel and entertainment.
Target (NYSE:TGT) also faces the repercussion of backlash against its Pride collection, which is projected to influence its second-quarter sales. The company, which has offered Pride-related products for years, revealed in May that it was making alterations to its Pride merchandise lineup. This decision, including the removal of items from transgender designer Erik Carnell’s Abprallen brand, was prompted by an escalation in conflicts between customers and employees.
Telsey Advisory Group’s Joseph Feldman explained that threats of violence from anti-pride individuals contributed to concerns and negatively impacted in-store traffic, particularly during June.
Jessica Ramirez, a senior analyst at Jane Hali & Associates, added a note of caution, suggesting that customers might not be inclined to spend on items that might not see use or necessity during the upcoming back-to-school season.
Underlying Factors
- Target is scheduled to announce its Q2 results on August 16 before the market opens.
- Analysts polled by Refinitiv project a 3.3% decline in Q2 revenue to $25.18 billion.
- The expected Q2 profit per share is $1.39.
- Rival retailer Walmart is set to reveal its results on August 17.
Wall Street Sentiment
- Target stock experienced a decline of over 12% year-to-date.
- The S&P 500 Consumer Discretionary Distribution & Retail index has witnessed an increase of more than 31% year-to-date.
- According to Refinitiv, the consensus rating among 37 analysts covering Target is “buy”, with 17 analysts giving it a “buy” rating or higher.
- The median price target for Target’s stock is $162.
Featured Image: Unsplash @ Max Bender
