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Target Misses on Q1 Earnings Estimates, Slashes FY25 Outlook
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Target Corporation (TGT - Free Report) reported first-quarter fiscal 2025 results, with the top and bottom lines missing the Zacks Consensus Estimate. TGT witnessed a sharp decline in comparable sales. Lower-than-expected results compelled the Minneapolis-based retailer to cut its full-year guidance, reflecting ongoing headwinds in consumer demand and operational pressures.
Despite sales falling short of expectations, the quarter saw positive developments such as robust digital growth, a 36% jump in same-day delivery via Target Circle 360 and successful designer collaborations like kate spade for Target.
Target’s Quarterly Performance: Key Metrics and Insights
Target reported adjusted earnings of $1.30 per share, which fell short of the Zacks Consensus Estimate of $1.62 and declined from $2.03 reported in the year-ago period. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
The big-box retailer generated total revenues of $23,846 million, which came below the Zacks Consensus Estimate of $24,228 million. The metric fell 2.8% on a year-over-year basis. We note that merchandise sales declined 3.1% to $23,405 million.
Meanwhile, comparable sales decreased 3.8%, following a 1.5% increase in the preceding quarter. The metric reflected a decline of 5.7% in comparable store sales but an increase of 4.7% in comparable digital sales. We had projected a decline of 1% in comparable sales.
Traffic or number of transactions plunged 2.4%, while the average transaction amount slid 1.4%. We had expected the average transaction amount to decline 1.6% for the quarter under review.
The gross margin contracted 60 basis points to 28.2% due to increased markdown activity and rising costs tied to digital fulfillment and supply-chain operations. The margin pressure was influenced by higher digital sales penetration and expenses related to the ramp-up of new supply chain facilities. The adjusted operating margin shrunk to 3.7% from 5.3% in the corresponding period last year. We had expected a 70-basis-point contraction in the operating margin.
Target Corporation Price, Consensus and EPS Surprise
Target ended the quarter with cash and cash equivalents of $2,887 million, long-term debt and other borrowings of $14,334 million and shareholders’ investment of $14,947 million. During the quarter, Target paid out dividends of $510 million.
TGT repurchased 2.2 million shares worth $251 million during the quarter under review. At the end of the quarter, the company had about $8.4 billion remaining under the repurchase program approved in August 2021.
A Sneak Peek Into TGT’s FY25 Outlook
This Zacks Rank #5 (Strong Sell) company now expects a low-single-digit decline in sales compared with its earlier forecast of 1% growth. It now foresees adjusted earnings in the band of $7.00-$9.00 per share, down from its prior forecast of $8.80 to $9.80. TGT guided GAAP earnings per share between $8.00 and $10.00.
Shares of Target have fallen 27.4% year to date against the industry’s growth of 9%.
Don’t Miss These Solid Bets
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 16.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 13.7% and 35.5%, respectively, from the year-ago reported numbers.
Mondelez International (MDLZ - Free Report) , which manufactures, markets, and sells snack food and beverage products, currently carries a Zacks Rank #2 (Buy). MDLZ has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Mondelez International’s current financial-year sales calls for growth of 4.9% from the year-ago reported numbers.
Grocery Outlet (GO - Free Report) , an extreme value retailer of quality, name-brand consumables and fresh products, carries a Zacks Rank #2. GO has a trailing four-quarter earnings surprise of 25.7%, on average.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales suggests growth of around 8% from the year-ago reported numbers.
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Target Misses on Q1 Earnings Estimates, Slashes FY25 Outlook
Target Corporation (TGT - Free Report) reported first-quarter fiscal 2025 results, with the top and bottom lines missing the Zacks Consensus Estimate. TGT witnessed a sharp decline in comparable sales. Lower-than-expected results compelled the Minneapolis-based retailer to cut its full-year guidance, reflecting ongoing headwinds in consumer demand and operational pressures.
Despite sales falling short of expectations, the quarter saw positive developments such as robust digital growth, a 36% jump in same-day delivery via Target Circle 360 and successful designer collaborations like kate spade for Target.
Target’s Quarterly Performance: Key Metrics and Insights
Target reported adjusted earnings of $1.30 per share, which fell short of the Zacks Consensus Estimate of $1.62 and declined from $2.03 reported in the year-ago period. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
The big-box retailer generated total revenues of $23,846 million, which came below the Zacks Consensus Estimate of $24,228 million. The metric fell 2.8% on a year-over-year basis. We note that merchandise sales declined 3.1% to $23,405 million.
Meanwhile, comparable sales decreased 3.8%, following a 1.5% increase in the preceding quarter. The metric reflected a decline of 5.7% in comparable store sales but an increase of 4.7% in comparable digital sales. We had projected a decline of 1% in comparable sales.
Traffic or number of transactions plunged 2.4%, while the average transaction amount slid 1.4%. We had expected the average transaction amount to decline 1.6% for the quarter under review.
The gross margin contracted 60 basis points to 28.2% due to increased markdown activity and rising costs tied to digital fulfillment and supply-chain operations. The margin pressure was influenced by higher digital sales penetration and expenses related to the ramp-up of new supply chain facilities. The adjusted operating margin shrunk to 3.7% from 5.3% in the corresponding period last year. We had expected a 70-basis-point contraction in the operating margin.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Target’s Financial Health Snapshot
Target ended the quarter with cash and cash equivalents of $2,887 million, long-term debt and other borrowings of $14,334 million and shareholders’ investment of $14,947 million. During the quarter, Target paid out dividends of $510 million.
TGT repurchased 2.2 million shares worth $251 million during the quarter under review. At the end of the quarter, the company had about $8.4 billion remaining under the repurchase program approved in August 2021.
A Sneak Peek Into TGT’s FY25 Outlook
This Zacks Rank #5 (Strong Sell) company now expects a low-single-digit decline in sales compared with its earlier forecast of 1% growth. It now foresees adjusted earnings in the band of $7.00-$9.00 per share, down from its prior forecast of $8.80 to $9.80. TGT guided GAAP earnings per share between $8.00 and $10.00.
Shares of Target have fallen 27.4% year to date against the industry’s growth of 9%.
Don’t Miss These Solid Bets
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1 (Strong Buy). SFM has a trailing four-quarter earnings surprise of 16.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of 13.7% and 35.5%, respectively, from the year-ago reported numbers.
Mondelez International (MDLZ - Free Report) , which manufactures, markets, and sells snack food and beverage products, currently carries a Zacks Rank #2 (Buy). MDLZ has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Mondelez International’s current financial-year sales calls for growth of 4.9% from the year-ago reported numbers.
Grocery Outlet (GO - Free Report) , an extreme value retailer of quality, name-brand consumables and fresh products, carries a Zacks Rank #2. GO has a trailing four-quarter earnings surprise of 25.7%, on average.
The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales suggests growth of around 8% from the year-ago reported numbers.