Earnings Previews: Target Corporation And Wal-Mart Stores Inc

The first quarter earnings reporting period ticks into the final stages this week with reports from big box retailers Target and Wal-Mart Stores. Target is set to report on Wednesday before opening bell, while Wal-Mart’s earnings release is scheduled for Thursday before the bell. Shares of both retailers declined during regular trading hours on Tuesday, although at least two firms picked Wal-Mart over Target going into the companies’ respective prints.

Target earnings preview

On average, Wall Street expects Target to post 91 cents per share in earnings, versus management’s outlook of 90 cents to $1 per share, on $15.65 billion in sales for the first quarter. In last year’s first quarter, the company posted earnings of $1.29 per share on $16.2 billion in sales. Consensus is calling for a 3.7% year over year decline in comparable store sales, while management guided for a decline in the low- to mid-single digits in comparable sales.

Gordon Haskett analyst Charles Grom initiated coverage of Target earlier this month with a Sell rating and $47 price target. He’s concerned about Wal-Mart having become a “more formidable” competitor and sees a big threat from Amazon, a view supported by a proprietary survey conducted by Cowen analysts. He’s also concerned about several “structural issues impacting the apparel arena.”

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Although management outlined $1 billion in “investments for this year,” Grom is convinced that the retailer’s “journey and margin compression” will last much longer than four quarters. He warned that Street estimates for 2018 and beyond are just too high, although he does feel the company is doing the right things.

Shares of Target fell by as much as 1.45% to $54.55 during regular trading hours on Thursday. The stock is down by more than 24% year to date.

Wal-Mart earnings preview

Consensus expects Wal-Mart to post earnings of 96 cents per share, versus the retailer’s guidance of 90 cents to $1 per share in earnings, on $117.1 billion in revenue. In the same quarter a year ago, the company posted earnings of 98 cents per share on $115.9 billion in sales. Consensus estimates call for comparable store sales to grow by 1.3% year over year.

Cowen analyst Oliver Chen has an Outperform rating and $77 price target on Wal-Mart, and he released the results of his firm’s proprietary Consumer Tracker survey in a note earlier this month. He said that in general, the survey indicated “more favorable dynamics” at Wal-Mart than at Target, and of particular interest, he learned that Wal-Mart store and website visits grew 0.32 percentage points year over year on a three-month average.

He reported that 80.9% of the more than 2,500 people surveyed said they had visited the big box retailer, with store visits being essentially flat with last year and website visits improving 2.19 percentage points. On the other hand, Target store and website visits fell 2.42 percentage points year over year, with 57.6% of those surveyed reporting a visit. Target store visits fell 2.42 percentage points from last year, while website visits fell 0.36 points. Chen also reported that 86.6% of Target shoppers also shopped at Amazon, while only 83.4% of Wal-Mart shoppers also shopped at Amazon.