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Target (TGT) Q1 Earnings Preview: More of Home Depot?

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Updated 17 May 2022

Key points:

  • Target is set to release earnings tomorrow morning, after Walmart and Home Depot posted today
  • Analysts expect a top line beat but bottom line miss
  • It will be interesting to see updates from investment in omni-channel capabilities
  • key point

With Walmart posting a surprise miss, and Home Depot soaring past estimates, the next retailer focus for investors is Target Corporation (NYSE: TGT), scheduled for before the opening bell on Wednesday. With the current situation regarding supply chains and inflationary pressures, tomorrow’s earnings story could be one of two sides. 

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The company is up against an ambitious backdrop, following an unprecedented sales period last year during pandemic panic buying. It is expected that Target will register a marginal increase in the top line. The current consensus for revenue stands at $24.5M, which would translate to a 1.1% growth year over year. The bottom line tells a different tale, expected to decrease year over year. With consensus sitting at $3.00, a bottom line hit would mean a decline of 18.7% from 2021. 

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Like Walmart’s recent digital endeavor, Target is investing heavily in deploying omni-channel capabilities, as well as constantly working away at behind-the-scenes brands, undertaking store refurbishments and expanding delivery options. Target remains a popular choice with consumers due to its multi-category assortment of supplies.

Despite this, Target has likely felt the force of soaring inflation, tightening consumer spending and meaning spending habits are more geared towards essentials than luxuries, which carry lower margins. Sales will undoubtedly seem soft against last year’s financials, exacerbated by a reduction in available cash. The earnings release is also likely to be laden with comments regarding supply chain, inventory updates, and fuel costs, which should give investors further insight into the year ahead – which is shaping up to be inundated with obstacles.