2/28/2023: Target Reports Better than Expected Earnings
Target reports quarterly earnings ending 1/28/2023 today. before market open. Revenue was $31.40 billion versus $30.46 billion expected. Adjusted EPS was $1.89 vs. $1.48 expected. Same-store sales grew 0.7% YoY vs. -1.74% expected. Overall, results were better than expected and TGT 0.00 stock went up 1% in today’s trading session. In the earnings release, Target CEO made the following statement:
We're pleased that our business delivered comparable sales growth in the fourth quarter, in what continues to be a very challenging environment. Strength in Food & Beverage, Beauty and Household Essentials offset ongoing softness in discretionary categories. This performance highlights the benefit of our multi-category merchandise assortment, which drives relevance with our guests in any environment, and is a key reason we grew traffic every quarter last year
Looking ahead, we're focused on executing our long-term strategy, including continued differentiation through affordability, assortment, ease and convenience. At the same time, we're planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment. We're pleased that we entered the year in a very healthy inventory position, reflecting our conservative approach in discretionary categories and our commitment to reliability in our frequency businesses. As we plan for the year ahead, we will continue to make robust capital investments and pursue efficiency opportunities in support of our long-term growth. We're proud of the loyalty and trust we've built with our guests, and want to thank our team for their ongoing commitment to delivering a truly exceptional and differentiated retail experience.
I actually think Target’s revenue will grow in the next few quarters. We are still in a high inflation environment. The real GDP might contract but the nominal GDP will most likely grow. In fact, the higher the inflation rate, the higher the nominal GDP growth we are likely to see. For retailers like Target, they are selling mostly everyday essentials and less expensive discretionary items. People might buy less items due to the inflation. But they end up spending more money also due to the inflation. I believe this could happen to many companies who can raise prices. Namely, despite having a recession ( two quarters of negative real GDP growth), companies are still growing their revenue and earnings by raising prices. In other words, we might end up seeing many companies experience good earnings growth in a recession in the coming year!!! I am curious how the recession will end in such a scenario though.