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Target Corp.’s stock rose 8% in premarket trade Wednesday, after the retailer beat profit estimates for the second quarter by a wide margin, offsetting a revenue miss and lowered guidance.
The company
TGT,
had net income of $835 million, or $1.80 a share, up from $183 million, or 39 cents a share, in the year-earlier period. Adjusted per-share earnings also came to $1.80, well ahead of the $1.43 FactSet consensus.
Revenue fell 5% to $24.773 billion from $26.037 billion a year ago, below the $25.178 billion FactSet consensus. Same-store sales fell 5.4%, while FactSet was expecting a decline of 3.7%.
The company said the profit rise — adjusted EPS was more than four times higher than a year ago and above its own guidance — reflected “a meaningful” recovery from last year’s inventory actions.
Retailers were hurt last year by supply-chain issues and inflation-weary customers who held off buying discretionary items, making it hard to clear inventories without resorting to big discounts.
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Target said this quarter continued growth in frequency businesses, which it defined as essentials and beauty and food and beverages, partially offset declines in discretionary categories.
Inventory at quarter-end was 17% below the year-earlier period, due to a 25% reduction in discretionary items, which was partially offset by investments to bolster frequency categories and long-term market share opportunities.
“With the benefit of a much-leaner inventory position than a year ago, the team was able to quickly respond to rapidly-changing topline trends throughout the second quarter, while continuing to focus on the guest experience,” Chief Executive Brian Cornell said in a statement.
The company’s second-quarter gross margin was 27%, up from 21.5% in 2022, reflecting lower markdowns, lower freight costs, retail price increases and lower supply chain and digital fulfillment costs.
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But Target lowered its full-year sales guidance to reflect recent soft sales trends and said it now expects a wide range around a mid-single-digit decline for the rest of the year. It expects adjusted EPS of $7.00 to $8.00, compared with prior guidance of $7.75 to $8.75. The FactSet consensus is for EPS of $7.72.
For the third quarter, Target is expecting same-store sales to be down in that same range and for adjusted EPS of $1.20 to $1.60. The FactSet consensus is for EPS of $1.82.
The stock has fallen 16% in the year to date, while the S&P 500
SPX,
has gained 16%.
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