​Target shares up 13% after Q2 earnings beat​

​​​Target shares rally on Q2 earnings beat

​Target, the American retail behemoth, reported better-than-expected second quarter (Q2) earnings on 21 August, beating Wall Street estimates and raising its full-year profit forecast. The company's shares rose about 13% in premarket trading on the positive news.

​Target's revenue for the quarter ending 3 August increased 2.7% year-over-year (YoY) to $25.5 billion, surpassing analyst expectations of $25.2 billion. Same-store sales, a key retail metric measuring sales at stores open for at least one year, rose 2%, significantly higher than forecasts of a 1.1% increase. This also marked the end of a year-long streak of same-store sales declines for Target.

​A key driver of Target's same-store sales growth was a 3% increase in store visits versus last year. The company also saw improving demand for discretionary items like apparel. Target executives noted this was the fourth straight quarter of positive discretionary sales trends, indicating consumer discretionary spending may be rebounding after an extended slump.

​Supported by the sales rebound, Target's bottom line also topped estimates. Adjusted earnings per share jumped 42% to $2.57, well above analyst projections of $2.18. Gross profit margin expanded to 28.9%, up from 27% last year, as Target benefited from the mix shift towards higher-margin discretionary merchandise.

​Consumer resilience helps target beat Q2 estimates

​Target management emphasised consumer resilience in the face of economic uncertainty. With customers focused on value, the company has rolled back prices to remain competitive. However, smarter inventory management and cost discipline helped Target offset margin pressures this quarter.

​Buoyed by better-than-expected first half results, Target raised its full-year earnings per share guidance to a range of $9.00 to $9.90, up from the prior $8.60 to $9.60 outlook. However, same-store sales projections were kept largely unchanged at 0% to 2% growth, reflecting an uncertain demand environment.

​Technical analysis of the Target share price

​The Target share price is on its way to hit its pre-Q2 results LSEG data and analytics average analysts target of $170.12. Before the Q2 earnings announcement there were 8 strong buys, 13 buys, 15 hold and 1 sell (as of 20/08/2024).

​Pre-Q2 earnings analyst recommendations

​The first minor resistance for the Target share price might become the 10 May high at $165.65, above which lie the March and April peaks at $175.53-to-$181.86 which are now in focus.

​Target share price daily chart

​Potential support can be found between the early May low and late May as well as July highs at $156.93-to-$155.80.

​Conclusion

​In summary, Target delivered forecast-beating sales and earnings in Q2. Improving discretionary category demand and resilient consumers supported the performance. While significant economic uncertainties remain, Target raised its full-year profit projections on the strong first half. The report signals discretionary retail may be turning a corner as shoppers continue to prioritise value amidst falling inflation, potential helping the Target share price to regain its $181.86 April peak.