Target misses on profit after Walmart Beat views, amid warnings

Target (TGT) missed earnings expectations but met revenue expectations on Wednesday, with the retail giant reconfirming its outlook for the second half of the year after lowering guidance in June. TGT’s financial report comes a day later walmart (WMT) beat lowered earnings and sales forecasts. The TGT share fell early Wednesday morning.


Target income

estimates: Wall Street predicted that Target would earn 79 cents a share on $26 billion in revenue. The same store turnover was estimated at approximately 3%.

Results: Target earned 39 cents a share, down 89% year over year. The company reported a 3% increase in revenue at $26 billion in the second quarter. Same store sales grew 2.6% in the second quarter and the operating profit margin was 1.2%.

Target maintained its full-year revenue forecast of low to mid-single digit growth. It also expects an operating margin of approximately 6% in the second half of 2022.

“I am very pleased with the underlying performance of our business, which continues to grow traffic and sales while delivering broad unit share gains in a very challenging environment,” said CEO Brian Cornell in a press release.

At the beginning of June, Target had lowered its expectations for the second quarter. The Minneapolis-based company lowered its second-quarter operating margin forecast from 5.3% to 2%.

The company also announced it plans price increases to address “unusually high transportation and fuel costs.” In addition, Target also announced its intention to clear excess inventory and cancel orders before the end of the second quarter.

“While these stocktaking actions put significant pressure on our short-term profitability, we believe it was the right long-term decision to support our guests, team and business,” Cornell said Wednesday.

Target made the decisions after it missed earnings estimates, pushed earnings down and reported large inventories of unsold goods in the first quarter. Those results sent Target stocks to their lowest level since September 2020.

Target stocks fell more than 3% ahead of Wednesday’s market trading. On Tuesday, shares climbed 3.9% to 180.15 Tuesday. TGT stocks have scaled back above the 10-week support but are still some distance from a bearish 50-day line.

Walmart Revenue

estimates: Analysts predicted that Walmart’s earnings would fall 9% to $1.62 per share. Analysts’ revenue target is $150.9 billion, up 7%.

Results: Walmart made $1.77 per share versus $1.78 a year earlier. Revenue grew 8.4% to $152.9 billion. Much of that revenue gain reflects higher prices, which are a response to rising costs.

Walmart reported weak fiscal Q1 results and guidance on May 17, followed by another warning on July 26.

The retail giant faced unwanted bulky items like TVs as inflation-stricken shoppers shifted to cheaper staples versus spending on discretionary goods.

On Tuesday, Walmart said it was getting a handle on its inventory.

“The measures we have taken to improve inventory levels in the US, along with a heavier mix of supermarket sales, are putting pressure on second-quarter profit margins and our outlook for the year,” CEO Doug McMillon said in a statement. declaration.

Executives told analysts Tuesday that Walmart canceled billions of dollars in orders to align inventory levels with expected demand. Fewer goods and higher prices resulted in strong sales, as Walmart reported that “middle-to-higher income customers” flock to its stores.

Outlook: The Dow Jones giant still expects same-store sales of Walmart in the US to grow 3% in the second half of the year, excluding fuel, or 4% for the full year. Based on current exchange rates, the company forecasts a headwind of approximately $2.1 billion in the second half of 2022.

Walmart sees adjusted earnings per share for the full year down 9%-11%. In July, the discount giant lowered its estimates, forecasting earnings per share to fall by 11%-13%. Analysts expected full-year earnings per share of $5.69, down 11.9%.

For the third quarter, Walmart expects net sales growth of approximately 5%, along with a 9%-11% decline in adjusted earnings per share.

Is Walmart a Buy or a Sell Now?

Walmart shares rose 5.1% to 139.39 Tuesday. According to MarketSmith’s analysis, the stocks are above their 50-day line and are moving towards their 200-day moving average.

The stock has a 48 Composite Rating out of 99. It has a 33 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for stock price movements with a score from 1 to 99. The rating shows how a stock’s performance in the past 52 weeks compared to all other stocks in the IBD database. The stock’s EPS rating is 69.

More store income

Walmart and Target earnings are part of a big week for retail stocks. Others to report during the week include off-price specialists TJX (TJX) and Ross stores (ROSE).

Walmart’s Dow Jones Pear DIY store (HD) surpassed Q2 views early Tuesday, with rival home improvement chain lowe’s (LOW) on tap Wednesday.

Annual inflation fell to 8.5% in July, from 9.1% in June. The slowdown was largely due to falling gas prices, but federal data shows that the prices of food and other goods are still rising.

Best Buy (BBY), money tree (DLTR) and Dollar General (DG) were among the other retail stocks that fell after Walmart’s warning in late July.

Target is third, behind Walmart and Costco (COST), in the Retail-Major Discount Chains industry group. The stock has a Composite Rating of 48. The Relative Strength Rating is 13 and the EPS Rating is 82.

Follow Kit Norton on Twitter @KitNorton for more coverage.


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