Telsey Reiterates Outperform Rating on Target (TGT)
Telsey analyst Joseph Feldman reiterated an Outperform rating and $195.00 price target on Target (NYSE: TGT).
The analyst comments "Target reported mixed 1Q24 results, with an inline comp of (3.7%), but slightly lower EPS of $2.03 vs. the FactSet consensus (FS) of $2.06 and our estimate of $2.10. The total comp of (3.7%) reflects a flattish sequential trend on a two-year basis, with an equal contribution from both ticket and traffic of (1.9%). The store comp declined 4.8%, partly offset by a return to growth in the digital comp of 1.4%—same-day services up 9.0%, including Drive Up increase of 13%—resulting in digital sales penetration of 18.3% vs. 17.5% last year. Broadly, pressure remains on discretionary categories, partly offset by outperformance in beauty. That said, Target noted that discretionary sales continue to improve sequentially as visible from the improvement in apparel sales of ~400 bps in 1Q24 from 4Q23. The 1Q24 operating margin expanded a modest 4 bps to 5.3% vs. our inline target of 5.4%, fueled by retail gross margin expansion of 142 bps to 27.7%, reflecting cost improvement, favorable product mix, and lower book to physical inventory adjustments, partly offset by higher promotional markdowns. The total SG&A ratio deleveraged 144 bps to 23.6%, given lower sales and higher labor and marketing costs. Inventory ended 1Q24 in a healthy position, down 7.0% vs. sales down 3.1%, which should help profitability ahead."
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Shares of Target closed at $155.78 yesterday.