Target Corporation (NYSE: TGT) stock sank more than 5 percent on Wednesday morning after the company reported lower-than-expected revenue in the first quarter and blamed the shortcoming on poor weather. Analysts say Target’s strong start to the second quarter suggests the market may be overreacting.
Target reported first-quarter adjusted earnings per share of $1.32 on revenue of $16.56 billion. Both numbers fell short of consensus analyst estimates of $1.39 and $16.58 billion, respectively. Revenue was up 3.4 percent from a year ago.
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Same-store sales were up 3 percent driven by a 3.7 percent increase in traffic. Average transaction size was down 0.6 percent.
Digital sales were up 28 percent on the quarter, but still represent just 5.2 percent of total sales.
In a statement, Target says its first-quarter traffic growth was the highest growth it has achieved in the past decade.
“Strong sales growth in our home, essentials, and food and beverage categories offset the impact of delayed sales in temperature-sensitive categories, which accelerated rapidly in recent weeks as weather improved across the country,” CEO Brian Cornell says in a statement.
Looking ahead, Target says it expects same-stores sales growth to increase to the “low- to mid- single-digit range” in the second quarter. Target guided for second-quarter adjusted EPS of between $1.30 and $1.50. Target also reaffirmed its previous full-year guidance of low-single-digit same-stores sales growth and EPS of between $5.15 and $5.45.
Despite the rough first quarter, Bank of America analyst Robert Ohmes says Target’s first-quarter same-store sales growth of 3 percent was better than his estimate of 2.5 percent, and Ohmes reaffirmed his thesis that Target is a top stock pick in the discount retail industry.
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“TGT posted better than expected sales and comp growth in [its fiscal first quarter], despite headwinds from cooler weather in April that weighed on seasonal merchandise categories,” Ohmes says. “TGT has seen its traffic momentum accelerate [in the] quarter to date, with a rapid improvement in seasonal merchandise sales as weather has improved in recent weeks.”
Bank of America has a “buy” rating and $86 price target for TGT stock.
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Target Corporation (TGT) Blames Weather For Poor Quarter originally appeared on usnews.com
