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General merchandise retailer Target (NYSE:TGT) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 3.1% year on year to $24.53 billion. It made a non-GAAP profit of $2.03 per share, down from its profit of $2.05 per share in the same quarter last year.
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Target (TGT) Q1 CY2024 Highlights:
- Revenue: $24.53 billion vs analyst estimates of $24.54 billion (small miss)
- EPS (non-GAAP): $2.03 vs analyst expectations of $2.06 (1.2% miss)
- EPS (non-GAAP) Guidance for Q2 CY2024 is $2.15 at the midpoint, below analyst estimates of $2.19
- EPS (non-GAAP) Guidance for full year 2024 maintained at $9.10 at the midpoint, below analyst estimates of $9.42
- Gross Margin (GAAP): 28.9%, up from 27.4% in the same quarter last year
- Free Cash Flow of $427 million is up from -$340 million in the same quarter last year
- Same-Store Sales were down 3.7% year on year (slight miss vs. expectations of down 3.6% year on year)
- Store Locations: 1,963 at quarter end, increasing by 9 over the last 12 months
- Market Capitalization: $72.07 billion
Large-format Grocery & General Merchandise RetailerBig-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.
Sales GrowthTarget is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.
As you can see below, the company's annualized revenue growth rate of 6.9% over the last five years was weak as its store footprint remained relatively unchanged.
This quarter, Target missed Wall Street's estimates and reported a rather uninspiring 3.1% year-on-year revenue decline, generating $24.53 billion in revenue. Looking ahead, Wall Street expects sales to grow 1.2% over the next 12 months, an acceleration from this quarter.
Same-Store SalesTarget's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 1.6% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.
In the latest quarter, Target's same-store sales fell 3.7% year on year.
Key Takeaways from Target's Q1 Results We liked how Target beat analysts' gross margin expectations this quarter. On the other hand, guidance was weak, with both next quarter and full-year earnings forecast missing analysts' expectations. Overall, this was a mediocre quarter for Target. The company is down 6.9% on the results and currently trades at $145 per share.
