Target (TGT) Stock Earnings News: Profits beat the Street, but revenue remains flat

Target reported an impressive first quarter earnings beat early Wednesday, but shares barely budged as revenue grew just 0.6% from a year earlier. TGT stock rose an imperceptible 0.4% to $157.60 in Wednesday’s premarket as management detailed a shocking level of theft and other “shrink” that it says will reduce full-year profits by $500 million.

Target stock news: Theft becomes major hit to earnings power

The market has not moved much following the earnings release despite Target beating Wall Street’s pessimistic expectations. Revenue was $40 million above consensus for the quarter at the retailer, but that is not even close to 1% of the $25.32 billion topline figure.

Simply put, Target is in a slow growth environment, and last year’s hefty inventories have to be sold at reduced prices to get cleared out. That said, inventories have fallen 16% YoY.

GAAP earnings per share (EPS) of $2.05 beat Wall Street’s consensus by about 25 cents but fell about 5% YoY. The better-than-expected earnings figure can mostly be attributed to the reduction in inventory.

Management seems worried, however, about “organized retail crime” that it blames for eating into net profit margins.

“We now expect shrink will reduce this year's profitability by more than $500 million compared with last year,” Target CEO Brian Cornell said. “While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue," he added.

To put that figure into perspective, Target earned $6.95 billion in 2022, so $500 million is slightly more than 7% of that.

Target kept its guide for the full year at a range of $7.75 to $8.85 in adjusted EPS, but the outlook for the second quarter is much worse than expected. Management gave a range of $1.30 to $1.70 in adjusted EPS – well below Wall Street’s expectation of $1.93.

Target stock forecast

Target stock has been on a downward trend since early February. This latest earnings report seems unlikely to reverse that course. TGT stock is already near support at $153.50, which is where it is likely to rest next. A break here could, however, send Target stock back to the $145.50 support level that defended the price action back in May, September and October of last year. 

Target will not regain a neutral footing until it breaks above the descending top trendline that began in February. Right now, the trendline sits at $165, or about 6% higher than the current price level.

TGT daily chart