The stock market opened mixed on Wednesday, with major market benchmarks trading on either side of the unchanged line as investors tried to parse through all the crosscurrents on Wall Street lately. With many people watching the state of the economy while others worry about historical stock market weakness in September and October, investors seem to be on edge as summer moves forward.
This week has been full of financial reports from retail stocks, and Wednesday was no exception. However, both Target (TGT 0.18%) and TJX Companies (TJX -0.06%) had good news for their shareholders, and that helped to bolster sentiment in the area. Here's everything you need to know about what Target and TJX said Wednesday morning.
Target climbs despite cutting guidance
Shares of Target were up 6% early Wednesday. The department store retailer reported fiscal second-quarter financial results for the period ended July 29 that looked good, even though Target had some comments that left investors asking questions about what the future could bring.
Target's quarterly numbers were mixed. Revenue sagged by 5% year over year to $24.4 billion, as comparable sales declined 5.4% from year-ago levels. However, net income more than quadrupled to $835 million. That produced adjusted earnings of $1.80 per share, which was better than many of those following the stock had anticipated.
Investors were pleased at the progress that Target has made in getting its inventory under control, as the retailer reported a 25% reduction in inventory in discretionary categories. That move addressed concerns in past periods that Target had overestimated demand for higher-ticket items in light of economic headwinds, and shareholders appreciated the disciplined approach that the retailer appears to be taking right now.
However, Target did say that recent sales trends forced it to cut its full-year guidance for revenue and earnings. Consumers still appear weak given Target's expectations for comparable sales to decline mid-single-digit percentages this year, and adjusted earnings of $7 to $8 per share were down $0.75 per share from previous guidance. That implies a tough back-to-school period for Target, but the holiday season will likely be more important in determining whether the company's long-term prospects still appear promising.
TJX has good news for investors
Elsewhere in retail, TJX saw its stock climb 3%. The parent company of Marshalls, T.J. Maxx, HomeGoods, and other retail lines reported fiscal second-quarter financial results for the period ended July 29 that were stronger than most of its shareholders had expected.
TJX reported an 8% rise in revenue to $12.8 billion, led by a 6% rise in comparable-store sales. Comps were strongest for its Marmaxx segment, while international sales grew at a slower pace. Net income climbed to $1 billion, and earnings of $0.85 per share were up 23% year over year.
TJX was particularly pleased with its margin performance. Lower freight costs played a key role, but the company also managed to keep overhead costs in check, allowing it to convert more of its revenue gains into profit. CEO Ernie Herrman also called out HomeGoods, which held up even as rival retailers of home furnishings fell behind.
With many opportunities to pick up good bargain merchandise for resale, TJX boosted its full-year fiscal 2024 guidance, now expecting comparable-store sales to rise 3% to 4%. Adjusted earnings of $3.56 to $3.62 per share would be a nice boon as well, and it shows that TJX is looking forward to what the holidays will bring.
