What To Expect From Target’s Q1 Earnings

Target (NYSE: TGT) is scheduled to announce its fiscal first quarter results on Wednesday, May 17. The company reported somewhat disappointing results in the fourth quarter, as both its revenues and earnings per share missed market expectations. Moreover, the company’s top line declined 4.3% year-over-year (y-o-y) in the quarter, driven by early season softness and disappointing traffic, partially offset by continued strength in the company’s signature categories – particularly kids, women’s apparel, home and toys – and strong Black Friday sales. It also posted adjusted earnings of $1.45 per share, which was at the lower end of its own guidance. This had a significant impact on the company’s stock price, which declined 13% following the earnings release and closed at a 52-week low. We expect the retailer to witness challenging trends in the fiscal first quarter as well.

Target is in a transition phase right now, as it is planning to re-model its business to remain competitive in the long term, following intense competition from brick-and-mortar as well as internet retailers. However, this transition could likely lead to uncertainties in the near term for the company. In 2017, Target plans to invest in enhanced store experiences, grow in digital initiatives and launch new exclusive brands. For the same reason, the company expects to generate about $1 billion less in earnings before interest and taxes (EBIT) than last year.

On the recent initiatives, Target is already pilot-testing a next-day home-delivery service called Target Restock for essentials such as detergent, laundry and coffee in the Minneapolis area. The Target Restock service will be available to REDcard users for an unspecified fee as the big-box retailer intends to compete with rivals Wal-Mart (NYSE:WMT) and Amazon (NASDAQ:AMZN) for same-day delivery. ^[1]

Weak Q1, FY 2017 Guidance

Target expects low to mid-single-digit comparable sales decline in the first quarter. In terms of adjusted earnings per share, the company expects to generate $0.80 to $1.00 per share in this quarter. Reuters’ compiled analyst estimates forecast revenues of $15.62 billion and earnings of $0.91 per share in Q1.

For the full-year 2017, Target expects a low-single digit decline in comparable sales, and both GAAP EPS from continuing operations and adjusted EPS of $3.80 to $4.20, with the higher end of the guidance representing a 16% decline.

See our complete analysis for Target  

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1. Target Is About to Start Testing Next-Day Home Delivery, Fortune, May 9 2017 [↩]