Target earnings: What you need to know

Target (TGT) continues to slip, while Walmart (WMT) continues to strengthen. This Wednesday, May 22nd, Target debuted a less-than-stellar first quarter earnings report, Yahoo Finance's Brooke DiPalma explains: "It's really the tale of two retailers...Target falling down roughly 3.7%. Just last week, we saw same-store sales from Walmart impress the Street with an upside of 3.8%."

Target's higher price points and smaller grocery departments have led some budget-conscious shoppers to turn away from the red-and-white retail giant, finding their dollar stretches further when shopping at Walmart. Yahoo Finance's Brian Sozzi reiterates: "Everywhere you look in this Target quarter, it stunk from top to bottom.... They noted that inflation is starting to slow, but they are not seeing a corresponding improvement in sales."

Inflation appears to be a key catalyst for Target's struggling sales. In response to this continued sales drop, the company announced price cuts to around 5,000 of their products, with more price cuts coming over the summer. D.A. Davidson Managing Director Michael Baker sees this as a bullish move, "the key right now is for them to get customers in the door, and win back some traffic and win back some market share." So although Target may be down, they certainly are not out.

Consumers may not have turned on Target, but they may, simply, not be able to afford it. Former Toys"R"US CEO Jerry Storch states, Target "has made its name selling nice-to-have fun products. That is not what the consumer is buying right now." Despite these current struggles, Target has proven itself as a quality company with "a great deal of consumer brand equity. People still love shopping there, so I think they have a lot to work with. So I'm not counting them out, but it's just going to take a while," he adds.

This post was written by Noah Chadwick

Video transcript

On Wednesday, everyone target will release its latest earnings report.

Brad target earnings are indeed on tap for the first quarter.

Analysts are expecting earnings per share of 205 on revenue heading into their support.

The stock is up about 10% this year.

Among financial analysts opinion fairly divided on Wall Street, 20 buys, 15 holds and one sell the brand of the bull's eye.

Yeah, the benefit for target right now, I suppose is that expectations are very low.

Uh We're looking for central sales to be down 4%.

So not a very high bar targets, disappointing sales pointing to cracks in the consumer, Ceo Brian Cornell saying that inflation is straining customers wallets very similar warning to what we've heard from Home Depot Lowes and even some fast food companies this earnings season.

It really is the tale of two retailers that were here target falling down roughly 3.7%.

Now just last week, we saw same source sales from Walmart impress the tree with the upside of 3.8% everywhere you looked in this target quarter, it stunk from top to bottom and I'm surprised target is out here reiterating its guidance on that call with Brian Cornell and the CFO and I believe was the Chief uh chief Merchandise Officer.

They noted that inflation is starting to slow, but they're not seeing a corresponding improvement in sales.

And that is a big problem.

The near term momentum has to go to Walmart target right now is thought of as more of a discretionary retailer.

We argue that they both can continue to outperform given the relative positioning of those businesses along with their valuation is target's reduction of prices for 5000 items bullish or bearish for the.

We think it's a positive, I think the key right now is for them to get customers in the door.

Uh and, and win back some traffic and win back some market share.

So we think it's the right thing to do and and should pay back, uh pay off, uh you know, with positive problems later in the year.

I I think the consumer has been snowing for some time to some degree.

This, it's been disguised oddly enough by inflation.

So essentially what's happening is the consumer spending more and getting less and they know it and target being a retailer who's made its name on those kind of nice to have fun products and that's not what the consumer is buying right now.

But, but they're a huge retailer.

They have a great deal amount of consumer brand equity.

People still love shopping there.

So I think they have a lot of work, a lot to work with.

So I'm not tagging them out, but it's gonna take a while.