Target earnings miss, sales fall as consumers buy fewer groceries and home goods

Target will report its fiscal first-quarter earnings on Wednesday, just days after it said it would cut prices on thousands of groceries and everyday items.

The Minneapolis-based retailer has set low expectations for the year ahead. It said in early March that it anticipated comparable sales would range from flat to up 2%, and adjusted earnings per share would range from $8.60 to $9.60 for the full year.

Here is what Wall Street expects for the company, based on a survey of analysts by LSEG:

• Earnings per share: $2.06
• Revenue: $24.52 billion

That would represent a drop in sales from $25.32 billion in the year-ago quarter.

Similar to other retailers, Target has had to contend with consumers who are still not spending as freely on clothing, home goods or other discretionary items because of price fatigue. The cheap, chic retailer has been particularly hurt by this dynamic because it gets less of its sales from food than rival Walmart, which draws about 60% of its U.S. sales from groceries. That compares to roughly 20% at Target.

Inflation cooled slightly in April, but the consumer price index was still up 3.4% on a year-over-year basis. The key measure gauges how much goods and services cost at the cash register.

Walmart beat Wall Street’s earnings and revenue expectations last week, as it posted double-digit e-commerce growth and said it is gaining market share from higher-income shoppers. The company’s Chief Financial Officer John David Rainey also said customers are turning to its grocery aisles for cheaper meals because fast food is so pricey.

Some of Walmart’s newer or more frequent shoppers could be coming from Target.

Target acknowledged consumers’ inflation weariness — and competition with discounters such as Walmart, Aldi and others — with its price cuts earlier this week. Target said it is concentrating most discounts on grocery staples including milk, meat, bread, fruit and vegetables, as well as paper towels and diapers.

Need to update: Shares of Target closed Tuesday at $TK, bringing its market value to $TK. As of Tuesday’s close, shares of Target are up/down TK%, lagging/leading the S&P 500.