Target (NYSE:TGT) Posts Q1 Sales In Line With Estimates But Stock Drops

General merchandise retailer Target (NYSE:TGT) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 3.1% year on year to $24.53 billion. It made a non-GAAP profit of $2.03 per share, down from its profit of $2.05 per share in the same quarter last year.

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With a higher focus on style and aesthetics compared to other large general merchandise retailers, Target (NYSE:TGT) serves the suburban consumer who is looking for a wide range of products under one roof.

Large-format Grocery & General Merchandise Retailer

Big-box retailers operate large stores that sell groceries and general merchandise at highly competitive prices. Because of their scale and resulting purchasing power, these big-box retailers–with annual sales in the tens to hundreds of billions of dollars–are able to get attractive volume discounts and sell at often the lowest prices. While e-commerce is a threat, these retailers have been able to weather the storm by either providing a unique in-store shopping experience or by reinvesting their hefty profits into omnichannel investments.

Sales Growth

Target is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.

As you can see below, the company's annualized revenue growth rate of 6.9% over the last five years was weak as its store footprint remained relatively unchanged.

This quarter, Target missed Wall Street's estimates and reported a rather uninspiring 3.1% year-on-year revenue decline, generating $24.53 billion in revenue. Looking ahead, Wall Street expects sales to grow 1.2% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Target's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 1.6% year on year. This performance is quite concerning and the company should reconsider its strategy before investing its precious capital into new store buildouts.

In the latest quarter, Target's same-store sales fell 3.7% year on year.

Key Takeaways from Target's Q1 Results

We liked how Target beat analysts' gross margin expectations this quarter. On the other hand, guidance was weak, with both next quarter and full-year earnings forecast missing analysts' expectations. Overall, this was a mediocre quarter for Target. The company is down 6.9% on the results and currently trades at $145 per share.

So should you invest in Target right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.