Despite reporting a modest earnings beat in the first quarter of fiscal 2024, Target (TGT) shares took a hit in premarket trading on Wednesday. Factors contributing to the weakening of sales include inflation and continuously declining discretionary spending. The retailer declared total revenue approximately at par with analyst predictions, amounting to $24.53 billion, a drop of 3% from the prior year's first-quarter figure of $25.32 billion. Profit slightly decreased to $942 million, or $2.03 per share, from $950 million, or $2.05 per share the previous year. However, this was slightly higher than anticipated, with estimates standing at $930.3 million, or $2.00 per share.
The company noted that the effect of shoppers cutting back on discretionary spending was still significant. However, it reported an upward trend in discretionary sales compared to previous quarters. In-person shopping also saw a downturn, with same-store sales falling 4.8% year-on-year. Nevertheless, Target is recording growth in its digital sector, posting a 13% year-on-year rise in its curbside pickup sales.
Target expects comparable store sales to remain flat or witness up to 2% yearly growth for the current quarter and the entire fiscal year. For the second quarter, it predicts diluted earnings per share (EPS) to range between $1.95 and $2.35, which suggests a below-the-estimate midpoint of $2.19. For the whole year, EPS is projected between $8.60 to $9.60, with a midpoint lower than the anticipated $9.37.
To rival retail and e-commerce behemoths like Amazon (AMZN) and Walmart (WMT), Target launched an updated version of its Target Circle membership program. This included a premium version offering perks like free same-day delivery. Though Target reported an increase of 1 million new members in the first quarter, it did not reveal the split between those opting for the free program and the Target Circle 360 subscription.
In a bid to compete with lower-cost retailers like Walmart, Target plans to reduce prices on about 5,000 of its most frequently purchased items over the summer. Despite seeing a rise of 9% in this year's shares to $155.78 through to Tuesday's close, Target's shares dropped by 8% before the opening bell on Wednesday.