By Grant Vanek
(Reuters) – Target is expected to post its first quarterly decline in revenue in nearly six years when it reports its results on Wednesday, as the big retailer moves from a shift in consumer spending away from discretionary goods to services.
In recent months, consumers have been spending more on services such as travel and entertainment, while reducing non-essential purchases including clothing and household goods amid soaring inflation.
“Target will suffer more versus the others because they have a much greater consumer discretionary component to their business,” said Edward Jones analyst Brian Yarbrough.
At least 16 analysts have lowered the retailer’s price target since the beginning of June as its merchandise leans toward discretionary items such as apparel, electronics, and beauty products.
Context
Target in May warned of dismal results for the second quarter as inflation forces consumers to shun non-essential goods.
Mastercard and American Express also noted in their most recent quarter a slowdown in purchases of expensive items, even as spending on travel and leisure remained strong.
Recent backlash on Target’s Pride collection is also expected to affect second quarter sales.
The company, which has been selling Pride-related products for years, said in May it was making “modifications” to its Pride merchandise, including removing some items from transgender designer Erik Carnell’s Abprallen brand, in response to an increase in spats between customers and employees. .
“There were some more extreme, anti-pride people, who were threatening violence, and so there was concern from some people, you know, going into the store at first,” said Joseph Feldman of the Telsey Advisory Group, adding that traffic was under pressure in June.
Jesica Ramirez, senior analyst at Gene Haley & Associates, added an extra note of caution, saying that customers may not necessarily spend more on things that may not be used or needed this back-to-school season.
The basics
** The target company is expected to announce its second-quarter results on August 16, before the market opens
** Its second-quarter revenue is expected to decline 3.3% to $25.18 billion, according to analysts surveyed by Refinitiv.
** Earnings per share in the second quarter are expected to be $1.39
** Rival Walmart is due to report on August 17
Wall Street spirits
** Target shares have lost more than 12% so far this year
** The S&P 500 Consumer and Retail Discretionary Distribution Index is up more than 31% year-to-date
**Current average rating of 37 analysts on Target Stock is “Buy,” with 17 rating “Buy” or higher – Refinitiv
** Average price target is $162
(Reporting by Grant Vanik in Bengaluru; Editing by Vinay Dwivedi)
