Earnings Report for Target (TGT) in Q4 of 2024

Target will report fiscal fourth-quarter earnings on Tuesday and show investors whether it is driving more full-price sales of discretionary merchandise, which has long been the retailer’s primary money maker.

Here’s what analysts are expecting from the big-box store, according to consensus estimates from LSEG:

• Earnings per share: $2.26
• Revenue: $30.8 billion

Target is expected to report a decline in earnings after the company raised its fourth-quarter sales forecast in January but left its profit outlook unchanged after cutting it in November.

The retailer raised its comparable sales guidance in January after it saw steady traffic during the crucial holiday shopping months, but its decision to maintain its profit guidance indicated that it relied on deals and discounts to drive sales, which is expected to put pressure on margins.

Target, which has long enticed shoppers with its wide range of discretionary merchandise, has struggled to win consumers over with those nice-to-have items amid persistent inflation, high interest rates and steep competition from online discounters and rival Walmart. That shift in mix has hurt Target and appears to be more tied to its execution than greater macroeconomic concerns. As discretionary sales lagged at Target, Walmart saw strength in the category and also won over more higher-income shoppers, who tend to be more resilient in times of economic softness.

In November, Target slashed its profit guidance after it posted its biggest earnings miss in two years. At the time, it blamed some of its troubles on the costs of preparing for a short-lived port strike in October, but most of that pressure came from softer sales of discretionary merchandise, which carry higher margins than essentials such as groceries and toothpaste.

The company has said that it has been able to drive momentum when it offers new eye-catching merchandise, such as fresh workout gear, pet accessories, or seasonal flavors of food.

For example, customers showed up and spent when Target started selling leggings from All In Motion, which came in bright colors and glittery patterns, for $25, Chief Commercial Officer Rick Gomez told CNBC in an interview last month. They also responded well when Target redesigned bras from its intimates and sleepwear line Auden.

“When we have newness with style, on trend, at affordable prices, the consumer is willing to shop,” Gomez said.

Now, Target is looking to build on that momentum and has turned to new partnerships to help drive sales. At the end of February, Target said it was partnering with Champion and Warby Parker, and both brands will show up in Target stores and online.

As part of its multiyear deal with Champion, Target will carry an exclusive line of sportswear that is designed more for lounging and living, rather than proper gym clothes. With Warby Parker, Target will open five shop-in-shops and start offering the eyewear brand’s products online, with a larger rollout planned for next year.

The partnerships are designed to entice shoppers with fresh merchandise, bring new customers in, and position Target to compete against its rivals, but it may take some time before these deals start bearing fruit.

Even though the agreements were announced at the beginning of the year, they will not officially launch until the second half of 2025.