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What’s happening: Shares of Target Corporation rose on Wednesday after the company released results for its first quarter.
What happened: Target reported better-than-expected sales and earnings for its first quarter.
However, the company warned that the trend may not continue, and issued a downbeat forecast for the current quarter.
How were the results: The Minneapolis, Minnesota-based company reported slight growth in sales for its first quarter.
Why it matters: Investors had been cautious ahead of Target’s quarterly report due to the difficulties faced last year and the ongoing pressures on consumer spending amid soaring inflation.
Target put the concerns to rest by delivering results that surpassed analyst estimates and held its guidance for the full year, which boosted its share price despite a weak forecast for the current quarter.
Target’s comparable store sales grew by 0.7%, while comparable digital sales declined by 3.4%. Gross margins expanded by 60 basis points to 26.3%, driven by lower freight costs, an increase in retail prices and lower discounts.
The company held cash and equivalents worth $1.3 billion as of April 29, 2023, while inventory at the end of April fell 16.3% year-over-year to $12.6 billion.
“As we look ahead, we now expect shrink will reduce this year’s profitability by more than $500 million compared with last year,” said CEO Brian Cornell. For the full year, Target reiterated its earnings forecast of $7.75 to $8.75 per share and said it sees comparable sales ranging from a low-single-digit decline to low-single-digit growth.
For the second quarter, the company guided to adjusted earnings of $1.30 to $1.70 per share, below market estimates of $1.93 per share and a low-single-digit decline in comparable sales.
How shares responded: Target’s shares gained 2.6% to close at $160.96 on Wednesday, following the release of quarterly results. The stock has lost around 1% over the past month.
What to watch: Investors will watch the inflation levels in the US and the state of the economy, which would determine Target’s overall performance this year.
Context: The CAD/USD forex pair gained on Wednesday, with the yield on government debt moving higher.
Details: Canada’s annual inflation rate accelerated for the first time in 10 months in April, according to data released on Tuesday. This increased speculations of the Bank of Canada resuming its interest rate hikes, after pausing its tightening campaign since January.
The country’s central bank kept interest rates unchanged during its previous two policy meetings, after inflation peaked at 8.1% last year.
However, inflation surprisingly accelerated to 4.4% in April, from 4.3% in March. The figure came in higher than market expectations of the inflation rate easing to 4.1%. Consumer prices rose 0.7% month-over-month, higher than market expectations of 0.4%.
A rise in the price for crude oil, one of Canada’s major exports, also lent support to the loonie. WTI crude oil prices climbed $1.97 to settle at $72.83 per barrel on Wednesday.
Canada’s 10 year government bond yield also rose to a 4-week high during Wednesday’s session.
The CAD/USD pair rose to 1.3457 on Wednesday. The S&P/TSX Composite Index gained 0.27% to settle at 20,296.43.
What are expectations: Traders await the release of new housing price index from Canada today. New home prices in Canada, which came in unchanged from the prior month in March, are expected to decline by 0.1% in April.
Other Markets: European indices closed mostly lower on Wednesday, with the FTSE 100, CAC 40 and STOXX Europe 600 Index down by 0.36%, 0.09% and 0.15%, respectively, and the DAX 40 up by 0.34%.
Russia agreed to extend the Ukraine Black Sea grain deal for 60 days. The news sent the safe-haven US dollar index slightly lower this morning.
Australia’s unemployment rate rose to 3.7% in April. The figure coming in higher than market estimates of 3.5% exerted pressure on the AUD/USD forex pair.
Japan’s trade deficit narrowed to ¥432.4 billion in April, from ¥854.9 billion in the year-ago month, sending the JPY/USD pair higher in forex trading this morning.
New Zealand’s producer input prices rose by 0.2% during the three months to March, slowing from a 0.5% increase in the previous quarter. The news lent support to the NZD/USD forex pair.
Russia’s gross domestic product contracted by 1.9% year-over-year in the first quarter. However, the figure was better than the 2.7% decline in the prior quarter and sent the RUB/USD pair higher in forex trading this morning.
Spain’s balance of trade, South Africa’s value of recorded building plans, Turkey’s gross foreign exchange reserves, US Philadelphia Fed Manufacturing index, initial jobless claims, continuing jobless claims, existing home sales, CB leading index, and natural gas stocks change, Bank of Mexico’s interest rate decision, as well as Argentina’s balance of trade.
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