Target (TGT) Q4 2024 Earnings

Target to Report Earnings: Can the Retailer Drive Full-Price Sales of Discretionary Merchandise?

Shoppers outside a Target store ahead of Black Friday in Clifton, New Jersey, on Nov. 26, 2024.

Target will report its fiscal fourth-quarter earnings on Tuesday and provide insights into whether it is driving more full-price sales of discretionary merchandise, which has long been the retailer’s primary money maker.

According to consensus estimates from LSEG, Target is expected to report:

• Earnings per share: $2.26
• Revenue: $30.8 billion

However, Target is expected to report a decline in earnings after the company raised its fourth-quarter sales forecast in January but left its profit outlook unchanged after cutting it in November. The retailer raised its comparable sales guidance in January after it saw steady traffic during the crucial holiday shopping months, but its decision to maintain its profit guidance indicated that it relied on deals and discounts to drive sales, which is expected to put pressure on margins.

Challenges Ahead

Target, which has long enticed shoppers with its wide range of discretionary merchandise, has struggled to win consumers over with those nice-to-have items amid persistent inflation, high interest rates, and steep competition from online discounters and rival Walmart. That shift in mix has hurt Target and appears to be more tied to its execution than greater macroeconomic concerns. As discretionary sales lagged at Target, Walmart saw strength in the category and also won over more higher-income shoppers, who tend to be more resilient in times of economic softness.

New Partnerships and Strategies

The company has said that it has been able to drive momentum when it offers new, eye-catching merchandise, such as fresh workout gear, pet accessories, or seasonal flavors of food. For example, customers showed up and spent when Target started selling leggings from All In Motion, which came in bright colors and glittery patterns, for $25, Chief Commercial Officer Rick Gomez told CNBC in an interview last month. They also responded well when Target redesigned bras from its intimates and sleepwear line Auden.

Target is looking to build on that momentum and has turned to new partnerships to help drive sales. At the end of February, Target said it was partnering with Champion and Warby Parker, and both brands will show up in Target stores and online. As part of its multi-year deal with Champion, Target will carry an exclusive line of sportswear that is designed more for lounging and living, rather than proper gym clothes. With Warby Parker, Target will open five shop-in-shops and start offering the eyewear brand’s products online, with a larger rollout planned for next year.

Conclusion

Target’s upcoming earnings report will provide insights into whether the retailer is able to drive full-price sales of discretionary merchandise. The company’s new partnerships and strategies may take some time to bear fruit, but if successful, could help Target compete more effectively against its rivals.

FAQs

Q: What are analysts expecting from Target’s fiscal fourth-quarter earnings report?
A: According to consensus estimates from LSEG, Target is expected to report earnings per share of $2.26 and revenue of $30.8 billion.

Q: Why is Target expected to report a decline in earnings?
A: Target raised its fourth-quarter sales forecast in January but left its profit outlook unchanged after cutting it in November, indicating that it relied on deals and discounts to drive sales, which is expected to put pressure on margins.

Q: What are the key challenges facing Target?
A: Target is struggling to win consumers over with discretionary merchandise amid persistent inflation, high interest rates, and steep competition from online discounters and rival Walmart.