4 months ago • 2 mins
What’s going on here?
Target reported a mixed bag of results on Wednesday.
What does this mean?
Target unveiled a set of results showing that customers were both shopping and dropping last quarter. Given its penchant for offering non-essentials, the retail giant was always poised for a challenging time, especially as consumers tighten their belts. And while beauty sales doubled, offsetting what would’ve been a more pronounced slump, the quarter marked the company’s first sales decline in four years. On the brighter side, Target handled its inventory cannily, clearing last year’s backlogs, reducing discounts, and ultimately making a profit that pleasantly surprised analysts. But – and it’s a significant “but” – the future still looks clouded: citing looming challenges like the resumption of student loan repayments, Target dialed back its annual sales and profit outlook.
Why should I care?
For markets: Grossing groceries.
Investors, ever the optimists, latched onto Target’s quarterly silver linings, pushing its shares up by 8% initially. But that was partly down to the bar being so low – and compared to Walmart, Target still has plenty of catching up to do. See, even after this recent surge, Walmart’s stock performance still overshadows Target’s by over 20%. Walmart’s probably got groceries to thank for that. After all, they make up just 20% of Target’s revenue, compared to over half of its rival’s – and that helps shield Walmart from the fickle winds of consumer trends. Having failed to beat ’em, though, Target’s now in the “join ’em” frame of mind, adding more daily essentials to its own shelves too.
The bigger picture: You might need that seatbelt.
Consumers are giving economists hope that the economy can achieve a so-called “soft-landing” – but there are still some pretty big bumps on the runway. After all, the Federal Reserve’s commitment to keeping rates high, coupled with increasing missed debt repayments and the shrinking cushion of pandemic savings, reminds us that this safety net won't hold indefinitely.
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