Targeted income misses the target as inflation-affected buyers avoid buying things they don’t really need

Target (TGT) missed first-quarter earnings numbers.

Blame inflation-stricken American families, its officials say.

The “biggest challenges” Target is hearing about from its shoppers are “inflation in food and household essentials,” says president and CEO Brian Cornell Giving detailed information about the results of the first quarter, he said while talking to reporters.

Cornell said inflation is putting “pressure on the consumer wallet.”

Target shares fell 7% in pre-market trading on Wednesday following the results.

He said sales trends were “normalising” in categories where inflation has eased.

This stress hit Target’s bread and butter — physical stores — the hardest, where traffic and transaction numbers declined in the quarter.

The giant supercentres are seeing weak sales in discretionary departments such as home goods.

As a result of the decline in store sales, Target CFO Michael Fidelke says the company is planning for “conservative” business for the remainder of the year.

Stifel analyst Mark Astrachan said, “Our estimate is likely to be largely unchanged in fiscal 2024, albeit with slightly lower EPS/operating income than consensus and generally better-than-expected results in recent quarters. “Given the heightened expectations, target stocks may underperform.” Earnings Release.

To right the ship and close the gap with better-performing rival Walmart (WMT), Target on Monday unveiled plans to lower prices on 5,000 items like milk, meat and bread.

The company has already reduced prices on around 1,500 items and this will continue throughout the summer.

  • gross sales: -3.1% year over year to $24.5 billion, vs. estimate of $24.13 billion

  • gross profit margin: 27.7% vs. 26.3% a year ago, vs. estimate of 27.4%

  • Diluted EPS: -1% y/y to $2.03, vs. estimate of $2.05 (guidance: $1.70 to $2.10)

  • comparable sales: -3.7% year over year (up 0.7% last year; Walmart reports 3.8% gain in Q1 2024) vs. -3.68% estimate

  • Inventories fell 7% compared to last year.

  • Despite having $9.7 billion remaining on prior buyback authorization, the company once again did not repurchase any of its stock in the quarter.

  • The number of transactions and average check size both declined 1.9% in the quarter.

  • Target ended the quarter with about $3.6 billion in cash.

  • Second-quarter earnings per share are expected to be $1.95 to $2.35, compared with estimates of $2.19.

  • Full-year earnings per share are estimated at $8.60 to $9.60 (reiterating prior guidance), versus estimates of $9.43.

One weapon in Target’s arsenal isn’t a cloud services business that can fund retail investments like rival Amazon (AMZN). Amazon Web Services CEO Adam Selipsky joins a new episode of the Opening Bid Podcast and shares what AWS is going to do next. Listen below.

brian sozzi is the executive editor of Yahoo Finance. He is also the host of “opening bid” Podcast. Follow Sozy on Twitter/X @briansozzi and on Linkedin, Tips on deals, mergers, active positions or anything else? Email broan.sozzi@yahoofinance.com. Are you a CEO and want to appear on Yahoo Finance Live? Email Brian Sozzi.

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