Target likely to see its 'turnaround story' in Q2: Analyst

Target (TGT) is reporting first-quarter earnings Wednesday morning. What are Wall Street analysts hoping to see out from the big-box retailer as it is currently opting to slash prices on certain item categories?

D.A. Davidson Managing Director and Senior Research Analyst Michael Baker finds expectations for Target to be "very low" and is hoping for its comparable sales to be positive moving into the second quarter.

"Target we see as a turnaround story, again, likely the fourth quarter in a row of negative comps for the first quarter. But we think that turns back to positive margins, should then benefit, we think get back to closer to historical trends, which are about 6% prior to the pandemic," Baker says.

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This post was written by Luke Carberry Mogan.

Video transcript

Michael, you also cover Target.

That's gonna be the next major retailer to report results this week.

It certainly has been a bit of a mixed picture so far.

What are you anticipating that, that we will be hearing from?

Target?

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

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

Uh So not a very high bar.

The key though is that they need to reiterate their guidance that cos should turn positive as early as the second quarter, the quarter that we're in now.

Uh and and then be about flat for, for the year.

Uh So, so that will be the key.

We think first quarter will down, they start to cycle some issues that they had last year.

And so we need to see an improvement in the second quarter.

Uh Also a name we're recommending recommending for different reasons.

Then then Walmart as an example, uh target, we see as a turnaround story again, likely the fourth quarter in a row of negative comps for the first quarter.

But we think that turns back to positive margins should then benefit.

We think it back to uh closer to historical trends which are about 6% prior to the pandemic.

The margins are about 6%.

They went way up during the pandemic.

They plummeted in 2022 when they had the inventory problem.

The now low fives, we think eventually their margins get back to 6% and that will be the catalyst for the shares is target's reduction of prices for 5000 items bullish or bearish for the stock.

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

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

So, 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.