Target’s Prices, Quarterly Results, Pandemic Winners, and More!
Editor’s Note: Happy Wednesday, dear reader!
In today’s edition of Street Authority Insider, we’ll take a look at some of the earnings updates and other announcements from some of the U.S.’s best-known retailers.
Let’s get to it!
Target Slashes Prices in Anti-Walmart Competitive Move
In an effort to better compete with big-box retail rival Walmart (NYSE: WMT), Target (NYSE: TGT) announced on Monday that it will lower the prices on roughly 5,000 frequently purchased items.
In a statement released by the company, Target said that the price cuts will affect staple items such as milk, bread, produce, paper towels, and diapers. Most of the cuts will be for Target’s house brands Everspring and Good & Gather. However, other name-brand goods — such as select products made by Clorox (NYSE: CLX) — will also have lower prices.
Target also said that it had already trimmed the prices of about 1,500 other products.
“We know consumers are feeling pressured to make the most of their budgets, and Target is here to help them save more,” Target’s head of food, essentials, and beauty, Rick Gomez, said.
“Our teams work hard to deliver great value every day, and these new lower prices across thousands of items will add up to additional big savings for the millions of consumers that shop Target each week for their everyday needs.”
Consumers have been struggling against rising prices for more than two years now. And although spending has remained unexpectedly strong, recent studies show that consumers are finally starting to push back against prices.
“Some of the things that have seen the biggest run-up in prices over the last few years are items that confront people on a daily basis: the cost of eating out, the cost of groceries, and the costs of fuel and gasoline and rents,” Columbia Business School professor Brett House recently told CNBC.
“Regardless of whether inflation is slowing amongst those goods, even with a lower inflation, prices remain very high, and people get a daily reminder of that.”
Last week, Walmart reported that consumers are prioritizing essential items such as food and health supplies rather than general merchandise like electronics and home décor.
According to Chief Financial Officer John David Rainey, steep menu prices are keeping consumers cooking at home — and buying groceries at Walmart — rather than eating out.
“It’s roughly 4.3 times more expensive to eat out than it is to eat at home,” Rainey said. “And that’s benefiting our business.”
“We’ve got customers that are coming to us more frequently than they have before, and newer customers that we haven’t traditionally had, and they’re coming into a Walmart whether it’s a virtual store online, or whether it’s one of our physical stores,” Rainey also noted.
Target is slated to report earnings tomorrow.
Macy’s Reports Drop in Q1 Sales But a Better Full-Year Forecast
Yesterday, Macy’s (NYSE: M) reported first-quarter earnings that beat Wall Street’s estimates and revenue that roughly met expectations. The department store chain is taking this as a sign that its turnaround plan is having some success.
For the quarter, adjusted earnings per share (EPS) came in at 27 cents versus analyst expectations of 15 cents. First-quarter revenue totaled $4.85 billion. According to LSEG, the consensus had been expecting $4.86 billion.
However, the company’s net income for the quarter took a 60% year-over-year nosedive, from $155 million, or 56 cents per share, to $62 million, or 22 cents per share.
For the full year, Macy’s is now expecting net sales of between $22.3 billion and $22.9 billion. That would represent a decline from last year’s net sales of $23.09 billion.
Full-year comparable sales are expected to do anything from drop by 1% to grow by 1.5% on a year-over-year basis. That’s an improvement from Macy’s previous forecast, which expected a comparable sales decline of as much as 1.5%.
The company is also expecting adjusted EPS of between $2.55 and $2.90 for the full year. That’s higher than Macy’s earlier outlook of between $2.45 and $2.85 per share.
According to CEO Tony Spring, the retailer’s turnaround plan — which involves closing underperforming stores, opening smaller stores to attract younger customers, and investing in upgrades at some of its current locations — showing signs of progress, albeit in the “early innings.”
In addition to Macy’s namesake department store, the company also owns the Bloomingdale’s and Bluemercury brands. Both of these chains have been performing better than Macy’s.
For example for the first quarter, Bluemercury reported 4.3% growth in comparable sales, while Bloomingdale’s noted a 0.3% uptick.
However, Macy’s reported a 0.4% decline in comparable sales for the quarter.
By 2027, Macy’s intends to close 150 underperforming namesake stores, keeping 350 of them open. At those locations, the company noted a 0.1% increase in comparable sales year over year.
In addition, the 50 stores that received investment from the company — to include upgrades in customer service, the rollout of new designer brands, and sessions with personal stylists — enjoyed a 3.4% year-over-year increase in comparable sales.
On the company’s quarterly earnings call, CFO and COO Adrian Mitchell noted that the consumers are expected to “remain under pressure” for the rest of 2024. However, the retailer expects its turnaround strategy to negate some of the potential risks.
This year, the legacy retailer resisted a hostile takeover bid from Arkhouse Management and Brigade Capital, which wanted to take the company private. Macy’s settled the matter last month by adding two additional board members.
Lowe’s Benefits From B2B Boost
Meanwhile, home improvement retailer Lowe’s (NYSE: LOW) reported better-than-expected quarterly earnings and revenue yesterday.
Earnings per share came in at $3.06, versus the $2.94 Wall Street had been expecting. And revenue totaled $21.36 billion, beating estimates of $21.12 billion.
However, that was a decline from the year-ago quarter, when Lowe’s posted sales of $22.35 billion. The fiscal first quarter marked the fifth consecutive quarter in which the retailer posted a year-over-year drop in sales.
However, like Macy’s, Lowe’s reported a year-over-year drop in net income, from $2.26 billion, or $3.77 per share, in the year-ago quarter to $1.76 billion, or $3.06 per share.
The reasons behind Lowe’s sales declines should all be familiar to us by now — consumer spending patterns showing signs of tightening, fewer home sales, etc.
“The home improvement customer is still on the sideline expressing concerns about the higher cost of living and the state of the overall economy,” CEO Marvin Ellison said on an earnings call yesterday.
Traditionally, Lowe’s customer base has been consumers tackling DIY projects. That’s different from rival Home Depot (NYSE: HD), which credits enterprise customers such as contractors with accounting for roughly half of annual sales.
In recent quarters, Lowe’s has gone after these professionals. According to Ellison, enterprise or “pro” spending currently accounts for roughly one-quarter of sales. He noted that these B2B (business-to-business) sales helped offset some of the declines the retailer has seen in do-it-yourself (DIY) spending.
Zoom’s Fall From Grace
Remember how indispensable Zoom Video Communications (NSDQ: ZM) was during the COVID-19 pandemic? The company’s video software solutions kept work teams meeting and loved ones connected during the lockdowns.
Zoom was one of the biggest pandemic winners, but its winning streak hasn’t extended into the post-pandemic environment.
Despite reporting 16% growth in adjusted EPS for its fiscal first quarter this week, Zoom’s short-term outlook disappointed the markets, sending shares lower.
Since reaching a peak north of $5,000 during the pandemic, Zoom’s market capitalization has plunged by nearly 90%.
But Zoom isn’t alone. In fact, most of the other Zoom favorites — including Peloton (NSDQ: PTON), Etsy (NSDQ: ETSY), and Moderna (NSDQ: MRNA) — have seen market cap devaluations of more than 70% since the height of the pandemic.
Take a look:
You will find more infographics at Statista
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