Target’s Fiscal Fourth-Quarter Sales Likely Remained ‘Challenged,’ BofA Says

Target’s (TGT) fiscal fourth-quarter sales likely remained “challenged,” though the retailer’s recent initiatives should help support traffic and share gains going forward, BofA Securities said Friday.

The company is scheduled to report fourth-quarter results Tuesday. BofA expects earnings to increase nearly 35% year over year to $2.55 per share, with revenue seen up 1.1% at $31.74 billion. Wall Street is looking for $2.39 and $31.81 billion, respectively, according to the brokerage.

BofA expects same-store sales to decline 5%, versus the Street’s call for a 4.6% drop. The firm expects moderating food and beverage inflation and soft discretionary trends to counter improving traffic, backed by Target’s strategic and merchandising measures.

“While near-term sales remain challenged, we believe investors may look through recent pressure to a potential inflection, which we believe (Target) may see in (the second quarter),” BofA analyst Robert Ohmes said in a note. The company is expected to face easier comparisons starting in the second quarter as it laps low traffic from last year’s Pride month controversy, according to the note.

BofA sees fourth-quarter and 2024 gross margins ahead of the Street’s views amid upside opportunities from a freight and transportation cost recovery and lower clearance levels, among other things, it said.

Although Target’s same-store sales and traffic have underperformed its large broad line retail peers such as Walmart (WMT) and Costco Wholesale (COST), its recent merchandising initiatives and new private label brand launches are likely to help improve its value perception, and support traffic and share gains going forward, Ohmes said.

The company launched its Figmint kitchenware brand in September and its low-price “dealworthy” essentials brand earlier this year.

BofA reiterated its buy rating and a $160 price objective on the Target stock.

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