TGT

Target Corporation

150.42
USD
2.46%
150.42
USD
2.46%
138.58 268.98
52 weeks
52 weeks

Mkt Cap 73.41B

Shares Out 488.04M

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What These 3 Key Retail Stocks' Mixed Signals Really Mean

Like many retail stocks this year, Best Buy (NYSE: BBY) recently reported poor first-quarter numbers and remained pessimistic about the rest of the year. Surprisingly, the shares bounced after the report. Meanwhile, fellow retailers Walmart (NYSE: WMT) and Target (NYSE: TGT) reported better first-quarter numbers, and shares of those companies cratered. Wall Street's expectations helped fuel this strange reaction -- but the analysts who drove those share gains or losses seem to be missing the point. Retail results send strange signals Best Buy's first-quarter report showed that sales fell 8.5% from the same quarter last year. The report also revealed that sales from existing stores, also known as comparable sales, were down 8%, with GAAP earnings down 42%. Yet shares popped over 9% after the announcement. Walmart, on the other hand, offered better results. The company reported that sales rose 2.4% in the first quarter. Additionally, comparable sales were up 3%, and GAAP earnings down 24.8%. Similarly, Target reported what seemed to be better numbers than Best Buy. Sales were up 4%, comparable sales up 3.3%, and GAAP earnings fell 51.9%. Despite announcing superior results, Walmart and Target stocks tanked after reporting. The different reactions might owe to analysts' short-term expectations for each stock. Best Buy analysts expected it to report GAAP earnings per share of $1.59. The company missed by only $0.02. But analysts expected $1.46 in GAAP earnings per share from Walmart, and $3.00 from Target. Walmart missed the mark by 11%, and Target missed by 27%. But all three companies share a common thread. Each noted on their first-quarter announcments that supply chain issues and inflation would make it tough for the retailers to top an outstanding 2021. Consumer-focused companies warn of shared struggles Best Buy CEO Corie Barry remarked, "We expected our FY23 financial results to be softer than last year as we lap stimulus and other government support, the consumer electronics industry cycles the last two years of unusually strong demand, and we continue to invest in our future. In addition, we planned for increased promotional activity and higher supply chain expenses." Walmart CEO Doug McMillon, "Bottom-line results were unexpected and reflect the unusual environment. U.S. inflation levels, particularly in food and fuel, created more pressure on margin mix and operating costs than we expected." Brian Cornell, CEO of Target, added, "Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations." As a result of deteriorating conditions for retailers, Best Buy and Walmart decreased their earnings-per-share guidance for the full year 2022. Target pulled its earnings-per-share guidance altogether. Buyer beware On top of the cost-related issues cited by each company's management, consumers will likely ramp up spending on travel and dining out, rather than retail items in the months to come. That's not good for any retailer, regardless of short-term analyst expectations. Don't let a short-term anomaly like this deceive you. Though Best Buy's stock outperformed based on its first-quarter results, 2022 has been a bad year for retailers, and it will likely get worse from here. 10 stocks we like better than Best Buy When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.* They just revealed what they believe are the ten best stocks for investors to buy right now... and Best Buy wasn't one of them! That's right -- they think these 10 stocks are even better buys. *Stock Advisor returns as of April 27, 2022 Fool contributor B.J. Cook holds no financial position in any companies mentioned. The Motley Fool has positions in and recommends Best Buy. The Motley Fool recommends Target. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

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