Target (TGT) may have to do a lot more this year than open Warby Parker (WRBY) eyeglass shops as it becomes the latest retailer to warn about the impact of Trump tariffs.
The discount retailer delivered sales, gross profit margin, and earnings beats for the fourth quarter on Tuesday. Target credited sequential improvements in sales of apparel and home goods for the better-than-expected quarter.
But the cheery news stopped with the holiday numbers — though the print showed margins and sales fell year on year.
For one, Target once again underperformed rival Walmart’s (WMT) sales growth in stores and online as it ramped up price rollbacks and offered expanded grocery assortments.
Listen: Will Trump tariffs hammer retail stocks?
Further, Target issued what amounts to a first quarter profit warning amid fresh Trump tariffs on goods from China and weak February sales. Shares finished the session down 3% to $117.13.
Walmart issued soft full-year guidance several weeks ago, pinning the blame on tariff uncertainty. Best Buy (BBY) shares were hammered by 13% today as it warned about tariff effects on results.
Read more: What are tariffs, and how do they affect you?
Target declined to share specific first quarter earnings guidance, but CEO Brian Cornell hinted on the earnings call that a slow February reflected unease about tariffs. Yahoo Finance data shows Wall Street analysts were looking for a slight first quarter year-on-year earnings improvement.
It also told analysts on the call it will move away from providing quarterly guidance, which likely won’t help bring back the bull case on the stock.
“Net-net, we think Target is managing as well as it can in a challenging consumer environment where discretionary spending is slowly improving compared to prior years,” Stifel analyst Mark Astrachan said in a client note.
Astrachan cut his profit estimates on Target, and took down his price target to $130 from $145.
Target’s stock is down 12% year to date and off by 24% in the past year. In the past five years, Target’s stock has fallen 31% compared to a 12% advance for the S&P 500 (^GSPC).
-
Fourth quarter net sales: -3.1% year over year to $30.9 billion, vs. estimates for $30.67 billion
-
Gross profit margin: 26.2% vs. 26.6% a year ago, vs. estimates for 25.5%
-
Diluted earnings per share: Down 19% year over year to $2.41, vs. estimates for $2.26 (guidance: $1.85 to $2.45)
-
Comparable sales: Up 1.5% year over year, vs. 1.18% estimate (Last year comparable sales fell 4.4%; Walmart US reported a 4.6% gain in its fourth quarter.)
