Proactive Investors - Target (NYSE:TGT) is expected to show a return to year-over-year sales growth for the fiscal second quarter when it reports its latest earnings before the stock market opens on Wednesday, August 21.
Analysts at Bank of America (NYSE:BAC) expect to see comparable sales growth of 1% compared to a 3.7% decline in the fiscal first quarter based on observed sales data, given easier comparisons and its value focus.
“While observed sales moderated through July, we believe this was driven by a pull-forward of summer sales to June due to extreme heat, a drop off following Target Circle week (July 7 to July 13) as consumers concentrate spending on key promotional periods, and ticket pressure from the incremental price reductions on 1,000 items planned for summer,” they wrote in a note to clients.
Wall Street analysts, on average, expect Target’s Q2 sales to grow 2% year-over-year to $25.2 billion and earnings per share (EPS) up about 20% at $2.18.
Gross margins are expected to benefit from Target’s $2 billion to $3 billion cost savings program, lean inventory position, category mix benefits from apparel green shoots, and a potential moderation in shrink headwinds.
“While discretionary categories remain weak overall, we believe Target’s lean inventory levels position it well for the uncertain macro, as avg. inventory as a percentage of sales has moderated to levels commensurate with weaker economic backdrops,” analysts believe.
They repeated their ‘Buy’ rating on Target and awarded it a $190 price objective.
They see a positive inflection in comparable sales and continued gross margin expansion more than offsetting potential risks including continued or worsening discretionary sales trends, competition in same-day delivery, and a slower-than-expected recovery in gross margins.
Shares of Target traded up 1.3% at about $146 on Monday.