Target Q1 earnings smash expectations as consumers continue to shop

Brian Sozzi
·Executive Editor
3 min read
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Mark down another retail earnings blowout at the hands of stimulus check spending and more upbeat U.S. consumers.

Target (TGT) squashed first quarter analyst estimates across the board on Wednesday as shoppers spent robustly on home goods, apparel, food and beauty items both online and inside Target's stores. Comparable sales surged 22.9% compared to a 10.8% increase a year ago as the pandemic sent consumers indoors and online in a big way. Online sales rose 50%, slowing from 141% growth last year.

Here's how Target stacked up to Wall Street estimates for the first quarter:

  • Net Sales: $24.2 billion vs. $21.77 billion

  • Same-Store Sales: +22.9% vs. +10%

  • Gross Profit Margin: 30% vs. 28.62%

  • Operating Profits: $2.4 billion vs. $1.53 billion

  • Adjusted Diluted EPS: $3.69 vs. $2.22

"I think right now consumers are increasingly optimistic, and we're certainly expecting to continue to see strong guest traffic in our stores and visits to our site," Target Chairman and CEO Brian Cornell told Yahoo Finance on a media call discussing the results. Cornell hinted that second quarter sales trends are tracking in line with the company's guidance.

Shares Wednesday in pre-market trading rose 4%.

The company warned second quarter comparable sales and operating profit margins would be dialed back a bit versus large gains last year.

Target guided to a second quarter comparable sales increase of a mid- to high-single digit percentage, slower than the 24.3% increase last year. Operating margins are unlikely to be as high as the 10% level achieved for last year's second quarter, Target said.

For the full year, Target sees operating margins "well above" the 2020 rate of 7% with the "potential" to reach 8% or "somewhat" higher.

The results from Target join an early list of retailers blowing away analyst forecasts for the first quarter. Home Depot, Macy's and Walmart all handily beat earnings estimates on Tuesday, fueled by consumers spending stimulus checks and analysts being unable to model for the economic acceleration. Most retail CEOs have voiced optimism on the strength of the consumer as they enter the summer months and look to return to a normal life after getting a COVID-19 vaccine.

"The consumer is healthy with lower debt and strong household savings. After a year of reduced activity, consumers are ready to get out, reconnect with family and friends and celebrate life. Our customers are ready to spend and demand is rising in categories we are positioned to win in," Macy's Chairman and CEO Jeff Gennette told analysts on an earnings conference call Tuesday.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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