Target is using this beloved brand to solve a major customer pain point

Updated at 7:18 am EDT

Target  (TGT) – Get Free Report posted stronger-than-expected second quarter earnings Wednesday, but slashed its full-year profit forecast amid a pullback in discretionary spending from American consumers that continue to face significant inflation pressures.

Target said adjusted earnings for the three months ended in June were pegged at $1.80 a share, more than six times the level for the same period last year and well ahead of the Wall Street consensus forecast of $1.39 per share.

Group revenue, Target said, fell 5% to $24.77 billion, missing analysts’ estimates of a $25.18 billion tally. Target said same-store sales fell 5.4% compared to last year, as well, missing the Refinitiv forecast of 3.2% decline. Digital sales were also down 10.5%, the biggest decline since the group began gathering separate data for online sales.

Target was able to improve its overall profit margins, which rose by 0.7% to 27%, thanks to lower markdowns as inventories fell by 17%. 

Looking into the current quarter, Target said it sees adjusted earnings of between $7 and $8 per share, well shy of its prior forecast of between $7.75 and $7.85 per share, with comparable sales in a “wide range” of mid-single digit decline for the remainder of the year.

Analysts expect consumers to struggle with rising gas prices, soaring mortgage rates and the end of a moratorium on student loan payments that could take some $100 billion out of retail spending over the coming year.

“As we move into the Fall, the team is gearing up for the biggest seasons of the year, with a focus on continuing to serve our guests with newness throughout our assortment,” said CEO Brian Cornell. “At the same time, we continue to take a cautious approach to planning our business, and have therefore adjusted our financial guidance in anticipation of continued near-term challenges on the topline.’

“This approach, along with the long-term investments we’re making in our business and strategy, position us to deliver sustainable, profitable growth in the years ahead,” Cornell added.

Target shares, which are down 18% for the year, were marked 8.6% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $135.80 each.

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