Target Q2 Earnings Miss Estimates, Comparable Sales Decline Y/Y

Target Corporation TGT reported second-quarter fiscal 2025 results, with revenues and earnings declining from the prior-year period. The top line surpassed the Zacks Consensus Estimate, while the bottom line fell short. Also, the company witnessed a decline in comparable sales.While results reflected ongoing headwinds in consumer demand and operational pressures, Target delivered sequential improvements, aided by stronger store traffic, disciplined expense management and continued digital momentum.Digital comparable sales advanced 4.3% year over year, driven by over 25% growth in same-day delivery through Target Circle 360 and sustained momentum in Drive Up services.Target Corporation Price, Consensus and EPS Surprise Target Corporation price-consensus-eps-surprise-chart | Target Corporation QuoteTarget’s Quarterly Performance: Key Metrics & InsightsTarget reported adjusted earnings of $2.05 per share, which missed the Zacks Consensus Estimate of $2.09 and declined 20.2% from $2.57 in the year-ago period.The big-box retailer generated total revenues of $25,211 million, which topped the Zacks Consensus Estimate of $24,911 million. The metric fell 0.9% on a year-over-year basis. We note that merchandise sales declined 1.2% to $24,719 million, while non-merchandise sales grew 14.2%, supported by Roundel advertising, membership and marketplace revenues.Meanwhile, comparable sales decreased 1.9%, following a 3.8% decline in the preceding quarter. The metric reflected a decline of 3.2% in comparable store sales but an increase of 4.3% in comparable digital sales. We had projected a decline of 3.3% in comparable sales.Traffic or the number of transactions dipped 1.3%, while the average transaction amount slid 0.6%. We had expected the average transaction amount to decline 2% for the quarter under review.The gross margin contracted 100 basis points to 29%, pressured by higher markdown activity, purchase order cancellation costs and category mix, partially offset by reduced inventory shrink and increased advertising and non-merchandise revenues. The operating margin shrank 120 basis points to 5.2% from 6.4% in the corresponding period last year. We had expected a 110-basis-point contraction in the operating margin.TGT Stock's Past 3-Month PerformanceImage Source: Zacks Investment ResearchTarget’s Financial Health SnapshotTarget ended the second quarter with cash and cash equivalents of $4,341 million, long-term debt and other borrowings of $15,320 million, and shareholders’ investment of $15,420 million. During the quarter, Target paid out dividends of $509 million.The company did not repurchase any shares during the quarter. At the end of the period, Target had about $8.4 billion remaining under the repurchase program approved in August 2021.A Sneak Peek Into TGT’s FY25 OutlookThis Zacks Rank #3 (Hold) company reaffirmed its fiscal 2025 guidance. It continues to expect a low-single-digit decline in sales. Adjusted earnings are projected in the band of $7-$9 per share, while GAAP earnings per share are anticipated in the range of $8-$10.Shares of Target have gained 13.3% in the past three months against the industry’s decline of 0.8%.Don’t Miss These Solid BetsThe Kroger Co. KR operates in the thin-margin grocery industry, and currently carries a Zacks Rank #2 (Buy). KR has a trailing four-quarter earnings surprise of 1.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Kroger’s current financial-year sales and earnings implies growth of 1.1% and 6.5%, respectively, from the year-ago reported numbers.Grocery Outlet GO, an extreme value retailer of quality, name-brand consumables and fresh products, carries a Zacks Rank #2 at present. GO has a trailing four-quarter earnings surprise of 28.2%, on average.The Zacks Consensus Estimate for Grocery Outlet’s current financial-year sales suggests growth of around 8.2% from the year-ago reported numbers.Ollie's Bargain Outlet Holdings OLLI is a value retailer of brand-name merchandise at drastically reduced prices and currently carries a Zacks Rank #2. OLLI has a trailing four-quarter earnings surprise of 2%, on average.The Zacks Consensus Estimate for Ollie's current fiscal-year sales and earnings implies growth of 14.2% and 14%, respectively, from the year-ago reported numbers.#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Target Corporation (TGT): Free Stock Analysis Report The Kroger Co. (KR): Free Stock Analysis Report Ollie's Bargain Outlet Holdings, Inc. (OLLI): Free Stock Analysis Report Grocery Outlet Holding Corp. (GO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks