The target earnings beat stands out in the retail sector

Based in Minneapolis, Minnesota Target Co. New York Stock Exchange: TGT is a major general merchandise retailer operating 1,956 stores in the United States. Its typical locations are about 135,000 square feet, while its small-format City Target stores are about 80,000 square feet. The retail and wholesale giant offers a wide range of products, from clothing, electronics, household products, home furnishings and beauty products to groceries, including products fresh, frozen and packaged meats and foods.

Target’s earnings reaction stood out from that of its competitors Walmart Inc. New York Stock Exchange: WMT AND Costco Wholesale Co. NASDAQ: COST, as shares surged nearly 15% on the back of its fiscal fourth-quarter 2023 earnings report, hitting new 52-week highs. Same-day services, including in-store pickup, drive-up and shipping, increased 13.6% year over year, generating 10% of total sales.

Make money with your private label brands

Like its retail competitors, Target is a large supplier of private label merchandise. These brands range from All in Motion sportswear, Art Class children’s clothing, Boots & Barkley pet supplies, Casaluna bedding products, Embark camping gear, Gigglescape toy brand, all Goodfellow & Co. men’s clothing and Market Pantry food items. Target also owns private-label wine and spirits brands, including California Roots, Casa Cantina, Jingle and Mingle, SunPop and Wine Cube.

Billion dollar store brands

Together, Target owns more than 45 different store brands that generate nearly $30 billion in annual sales. Cat & Jack, Threshold and Good & Gather are three of the 11 private label brands that generate sales of $1 billion or more annually. Private labels bring in much higher profit margins, costing consumers less, like the grocery giant The Kroger Co. NYSE: KR can attest.

The target hits the EPS Sweet Spot.

Target reported fourth-quarter 2023 earnings per share of $2.98, beating consensus analysts’ estimates of $2.42 by 56 cents. Revenue increased 1.6% year over year to $31.47 billion versus consensus estimates of $31.83 billion.

For full-year 2023, Target grew its EPS by 50% to $8.94. Operating margins increased 200 bps to 5.3%. Operating profit increased $2 billion compared to 2022. Cost-saving efficiency sales exceeded $500 million. Cash from operations grew more than 100% year over year to $8.6 billion from $4 billion in 2022. AI-powered insights on MarketBeat.

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Target issued in-line guidance for first-quarter 2024 EPS of $1.70 to $2.10 versus consensus analyst estimates of $2.09. Comparable sales are expected to decline 3% to 5% in the quarter. Full-year 2024 EPS is expected to be between $8.60 and $9.60 versus consensus estimates of $9.17. Comparable sales are expected to grow between flat and 2%. Target paid $508 million in dividends in the fourth quarter of 2023 compared to $497 million in the year-ago quarter.

Grow your collaborations and partnerships

Target continues to grow its decades-long collaborations with major brands like The Apple company. NASDAQ:AAPL, Starbucks Co. NASDAQ: SBUX AND The Walt Disney Co. NYSE: DIS. New partnerships with Magnolia, CBS, Levi’s, Hearth & Hearth and Ulta Beauty Inc. NASDAQ:ULTA the shop within the shop increased sales and loyalty.

CEO Insights

Target CEO Brian Cornell noted that customers have responded to novelty, value and inspiration due to the ease of the digital and in-store shopping experience. Cornell plans to continue investing in strengths and differentiators responsible for delivering strong performance, including its Target Circle membership program. This is the free loyalty program that provides 1% cash back shopping rewards that can be used for exclusives and personalized discounts and to vote for charitable causes supported by Target. It replaced its previous rewards program called Cartwheel in 2019.

Cornell plans to renovate its stores and open nearly 300 over the next decade. Cornell concluded: “Discovery and inspiration have always been a hallmark of our shopping experience. We started by providing inspiration and easy access to our stores with no barrier between impulse and purchase. But we see an opportunity to do even more, to think differently about the intersection of physical, digital and social so that consumers can discover Target products wherever they spend their time.”

Target analyst ratings and price targets I’m on MarketBeat. MarketBeat Stocks screener can also help you find Target’s peers and competitor stocks.

Daily breakout of the ascending triangle

The daily candlestick chart on TGT illustrates an ascending triangle breakout pattern. The lower ascending trendline formed at the $123.96 gap since the Q3 2023 earnings release on November 15, 2023. The flat-top resistance format at $142.68 was tested multiple times as the buy daily market structure low (MSL) triggered the breakout of $139.73.

TGT was able to stage a rally to $154.77 ahead of its Q4 2023 earnings release, which resulted in a price gap to $165.21 on March 5, 2024, as shares rose to a high of $175.53 before peaking. The daily relative strength index (RSI) rebounded and peaked in the 80 band while heading towards the overbought 70 band. The pullback support levels are at $165.21, $160.80, $154.77, and $150.09.

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