Target (TGT -2.43%), the retail giant known for its wide range of merchandise, reported its Q1 2024 earnings on May 22, releasing mixed results.
The company's total revenue stood at $24.5 billion, marking a 3.1% decline from the year-ago quarter. Comparable sales decreased by 3.7%, aligning closely with management's guidance of a 3% to 5% decline.
Despite the revenue drop, Target's GAAP EPS and Adjusted EPS both came in at $2.03, within the anticipated range of $1.70 to $2.10. Overall, the quarter presented a blend of steady performance and notable areas of concern.
| Metric | Q1 2024 Result | Management's Guidance | Q1 2023 Result | % YoY Change |
|---|---|---|---|---|
| Total Revenue | $24.5 billion | N/A | $25.3 billion | (3.2%) |
| Comparable Sales | (3.7%) | (3%) to (5%) | 0.0% | (3.7%) |
| GAAP and non-GAAP EPS | $2.03 | $1.70 to $2.10 | $2.05 | (1%) |
| Digital Sales Growth | 1.4% | N/A | (3.4%) | 1.4% pp |
| Comparable Store Sales Decline | (4.8%) | N/A | N/A | (4.8 pp) |
Data sources: GAAP results and management guidance from the company's SEC filings. YoY = Year over Year. PP = percentage points.
Target's business overview
Target operates over 1,900 stores across the U.S. and provides a diverse range of products, from groceries and household essentials to clothing and electronics. The company blends physical stores with digital channels to offer a seamless shopping experience, emphasizing convenience through services like curbside pickup and same-day delivery.
In recent years, Target has focused on strengthening its product portfolio with exclusive partnerships and owned brands, enhancing omnichannel capabilities, and expanding its loyalty programs. These efforts aim to build customer loyalty and drive sales growth in a competitive retail environment.
Quarterly performance highlights
In Q1 2024, Target's total revenue was $24.5 billion, a 3.1% decline year-over-year due to weaker same-store sales. Store-originated sales fell by 4.8%, reflecting broader pressures on discretionary spending. At the same time, digital sales saw a modest increase of 1.4%, driven by nearly 9% growth in same-day services. The "Drive Up" option was a particularly successful feature with over 13% sales growth.
The company's GAAP and Adjusted EPS both came in at $2.03, slightly below the previous year's $2.05 but within the range of $1.70 to $2.10 forecast by management. Operating income was $1.3 billion, a 2.4% drop from the same period last year. However, the operating income margin rate improved to 5.3% from 5.2%, indicating modest success in maintaining profitability despite the revenue decline.
Continuing its efforts to boost operational efficiency, Target saw an increase in its selling, general, and administrative (SG&A) expense ratios, which went up from 19.8% to 21.1% year-over-year. This rise was due to increased investments in pay, benefits, and marketing. Nevertheless, the gross margin rate improved to 27.7% from 26.3%, thanks to better sales mix and cost management.
The beauty segment performed well, showing continued growth. This upside balanced against declines in discretionary categories like apparel, though even this slide showed some improvement compared to previous quarters. The relaunch of the Target Circle loyalty program in April added over 1 million new members, reflecting strong consumer engagement with the Target brand.
The look ahead
Target's management has provided guidance for Q2 2024, expecting a 0% to 2% increase in comparable store sales and forecasting GAAP and Adjusted EPS between $1.95 and $2.35. For the full year, the company continues to project a 0% to 2% increase in comparable sales with EPS ranging from $8.60 to $9.60.
Investors should monitor how Target navigates pressures on discretionary spending and manages operational costs. The company's ability to sustain growth in its digital channels and loyalty program will be critical to achieving its financial goals. Furthermore, management's confidence in reaffirming its full-year guidance suggests a steady outlook ahead despite a bevy of business challenges.
