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Target will report quarterly earnings on Wednesday as the retailer tries to make a comeback from a prolonged period of weaker sales and profits.
Here is what Wall Street expects for the Minneapolis-based retailer, according to a survey of analysts by LSEG:
- Earnings per share: $2.18
- Revenue: $25.21 billion
Target, known for its wide array of trendy but low-priced merchandise, has been hurt as consumers buy fewer discretionary items such as new outfits or home decor while they pay more for everyday expenses such as food and housing. The company’s comparable sales have declined for the past four quarters. The industry metric, which is also called same-store sales, takes out the effect of one-time factors such as store openings and closures.
Yet, Target leaders said in May that the company was on track to return to sales growth in the second quarter. Target said comparable sales for the full year would range from flat to up 2%, and adjusted earnings per share would be between $8.60 and $9.60.
Target has moved to try to rev up sales and drive higher foot traffic. It announced in May that it would cut prices on about 5,000 frequently bought items, including diapers, milk and paper towels. The company relaunched its loyalty program early this year and introduced a new paid membership, Target Circle 360, which includes perks such as free same-day deliveries. Target also threw its own sales event in July to compete with Amazon‘s Prime Day.
Back-to-school is also a big season for the retailer, since it is a time when families typically spring for new shoes, clothes, backpacks, notebooks and more.
There are other indicators that could bode well for Target. Consumer spending came in stronger than expected in July, with advanced retail sales rising 1% compared to the prior month, according to the U.S. Department of Commerce.
Big-box competitor Walmart last week beat Wall Street’s expectations for its own quarter and shook off fears that consumer health has worsened. Chief Financial Officer John David Rainey told CNBC that customers “remain choiceful, discerning [and] value-seeking,” but he added, “we don’t see any additional fraying of consumer health.”
Yet, Target’s mix of sales looks different than Walmart’s. Only 23% of Target’s revenue comes from groceries, compared to about 60% for Walmart’s U.S. business, according to the companies’ most recent annual filings.
Plus, Walmart’s quarterly results could threaten Target. On an earnings call last week, Rainey said most of Walmart’s market share gains are coming from upper-income households — customers that may be choosing Walmart’s stores and website over other retailers, such as Target.
Shares of Target closed on Tuesday at $144.33. As of Tuesday’s close, the company’s stock is up about 1% so far this year. That’s trailed behind the S&P 500’s approximately 17% gains during the same period.