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Target Corporation Posts Q1 FY2023 Results

05/18/2023

On May 17th Target Corporation (TGT) posted results for Q1, FY2023 ending April 29th.  For the quarter, the Company earned $950 million on revenue of $25,322 million with a diluted EPS of $2.05.  For the corresponding Q1of FY2022, Target earned $1,009 million on sales of $25,170 million with a diluted EPS of $3.21. Revenue was 0.6 percent higher but net earnings decreased by 5.8 percent. Gross margin increased 2.6 percent from Q1 2022 to 27.4 percent due to lower freight costs. Operating margin was down 1.9 percent to 5.3 percent. Inventory was down 16 percent.

 

Comparable same-store sales increased by 0.7 percent compared to the Q1 FY 2022 value of 3.9 percent. Digital sales were down 3.4 percent compared to a rise of 3.2 percent for the 1st Quarter of 2022. Same-day services (Shipt and pick-up) increased by mid-single digit values.

 

In commenting on results Brian Cornell Chairman and CEO stated, "We came into the year clear-eyed about the challenges consumers are facing, and we were determined to build on the trust we've established with our guests. It's required agility and the ability to flex across our multi-category portfolio as we lean into value and the product categories our guests need most right now. Thanks to the team's dedication, we saw an increase in guest traffic in Q1, with total sales increasing and profitability ahead of expectations.

 

As we look ahead, we now expect shrink will reduce this year's profitability by more than $500 million compared with last year. While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue. We are making significant investments in strategies to prevent this from happening in our stores and protect our guests and our team. We're also focused on managing the financial impact on our business so we can continue to keep our stores open, knowing they create local jobs and offer convenient access to essentials.

 

During the conference call Cornell opined on consumer sentiment stating,  “We continue to see a guest who is shopping in our stores and using our same-day services. They're using pickup, they're using drive up, and we know that inside of that same-day pack are the items like food, beverage and household essentials. Those are things you need each and every day. Many of the items that we ship directly to your home are part of that discretionary portfolio where we have seen a consumer make changes ... and we have seen trends slow," Cornell said on a call with reporters. He added: "I think the trends that we're seeing in digital really mirror what we're seeing from an overall consumer spending standpoint where they're investing more in those household essentials and food and beverage items, and they're shopping more cautiously when it comes to all things discretionary."

 

The Company maintained guidance for fiscal 2023. Target expects low-to mid-single digit revenue growth or a decline, operating income will increase by $1 billion and adjusted EPS will range from $7.75 to $8.75”.

 

At the end of FY2022, Target Corporation operated 1,948 stores with a total retail area of 244,584 square feet. The company invested $5,528 million in property and equipment during fiscal 2022.

 

On April 29th Target posted total assets of $52,150 million, up 2.6 percent from the end of the corresponding quarter in FY2022. Long-term debt and lease obligations attained $20,389 million up 15.9 percent. Target Corporation had an intraday market capitalization of $72,140 million on May 17th. The Company has traded over the past fifty-two weeks in a range of $137.16 to $183.89 with a 50-day moving average of $160.33.  TGT trades with a forward P/E of 18.3. On May 17th pre-release the share closed at $156.98 but after the morning release on May 17th at 13H00 TGT traded at $160.83 on an up market.

 

Twelve-month trailing operating margin was 3.6 percent and profit margin 2.6 percent.  The Company generated a return on assets of 4.6 percent and 23.1 percent on equity.