Introduction
2023 was a tough year for Target Corporation (NYSE: TGT). In Q1 and Q2 of 2023, the retailer suffered a decline in sales and a loss of market share in the food and discretionary categories, causing alarm for investors. In June 2023, J.P. Morgan Analyst Christopher Horvers downgraded the stock from overweight to neutral – and many other analysts followed suit. Target went on to exceed analyst forecasts in Q3 2023, but they were far from being in the clear. Horvers noted that Target still had an uphill battle ahead of the holiday season, with consumers cutting back or delaying spending due to “the onset of student loan repayments, increased credit card debt, and higher interest rates.” The stage was set: If Target wanted to signal that they were headed in the right direction, the retailer needed to overcome these odds and continue to show improvement in Q4 2023.
Analysis
After Target announced Q4 2023 earnings on March 5, 2024, the markets responded positively – and so did business media. Yahoo! Finance and CNBC both mentioned the 12% increase in share price in their headlines, citing various reasons for the quarter’s success. Yahoo’s Brian Sozzi highlighted that “Target managed to preserve its profit margins by shedding $500 million in expenses.” CNBC’s Melissa Repko focused on how Target emphasized value in the quarter, citing one example being how over the holiday season, “Target touted a wide assortment of gifts and a holiday meal for four for under $25.” These articles underscored the ways Target was able to exceed expectations for the quarter.
Other business media looked forward in their coverage, shifting the conversation from the quarterly results to how the retailer is planning to move forward. Sarah Nassauer from WSJ summarized that the retailer “is betting that its plans to upgrade stores, refresh a membership program and expand private brands can help it rebound from a rocky 2023.” FOX Business reported that Target is exploring ideas such as “a new Target Circle membership program, to reignite sales, traffic and market share gains in 2024.” With Target now showing strong signs of recovery, these articles emphasize the retailer’s focus on growth in 2024.
Analysts also responded positively to the results. Morgan Stanley’s Simeon Gutman raised their price target on Target by 15.2% from $165 to $190, citing the reasoning being “the company’s improving market share, inflecting top-line growth, and visibility of a path to a 6%+ EBIT margin.” Analysts from other well-established financial firms also raised their price targets for the stock, with increases ranging anywhere from 14.6% all the way to 26.8%. These increases are a nod from financial analysts that they like the progress Target has made and are confident in the company’s strategy for the upcoming year.
While the response to the earnings was largely positive, there was negative sentiment when focusing purely on sales numbers. Mary Meisenzahl from Digital Commerce 360, a trade publication focusing on e-commerce, noted that “the retailer said online sales made up more than one-fifth of total sales in the fourth quarter, but they declined 0.7% year over year.” While it is unflattering that the decline in sales persisted, it is a fact. However, when juxtaposed with the operational efficiencies achieved by Target this year, the narrative is still overwhelmingly positive. Further, every article touched on efforts to boost online sales, noting the new membership program Target is rolling out in April.
Conclusion
Overall, media and analyst sentiment for Target has shifted from caution and skepticism in the latter part of 2023 to a newfound optimism after the Q4 2023 earnings report. Most of the coverage commended Target for exceeding expectations and raised little objections about the company’s proposed strategy for moving forward. As such, Target should move forward with the strategy they have laid out for 2024. Only time will tell, but continued improvements in sales and market share will show that the company is back on track and help the company earn back a “buy” rating from analysts.