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Target shares spike after upbeat Q4 results

 

Wednesday, March 06, 2024

Today’s headlines

What’s happening: Shares of Target Corporation rose sharply on Tuesday, after the company released results for its fourth quarter.

What happened: The mass merchandiser posted stronger-than-expected sales and earnings for its latest quarter.

However, Target reported a decline in its comparable sales for the November to January period as well as a decline in digital sales for the fifth straight quarter.

How were the results: The Minneapolis, Minnesota-based company reported a slight increase in sales in the fourth quarter ended February 3.

  • Revenues grew 1.7% year-over-year to $31.92 billion, topping the consensus estimates of $31.83 billion.
  • Adjusted earnings came in at $2.98 per share, up from $1.89 per share in the year-ago period, exceeding Wall Street expectations of $2.42 per share.

Why it matters: Target said strong spending during Black Friday and Cyber Monday provided a boost to its holiday-quarter sales.

Its comparable sales fell 4.4% during the fourth quarter, compared to market expectations of a 4.6% decline. Comparable store sales declined 5.4% and comparable digital sales fell 0.7% in the quarter.

Target’s online sales slipped 0.7%, compared to the 6% decline recorded in the prior quarter.

Target’s gross margins expanded by 290 basis points to 25.6%.

“Our team’s efforts changed the momentum of our business, further improving our sales and traffic trends in the fourth quarter while driving profitability well ahead of expectations,” CEO Brian Cornell said during the earnings call.

Management guided to adjusted earnings of $8.60 to $9.60 per share for fiscal 2024, versus market estimates of $9.14 per share. They also projected an increase of 0% to 2% in comparable sales.

The company guided to adjusted earnings of $1.70 to $2.10 per share for the first quarter, compared to market estimates of $2.09 per share. Target expects comparable sales to decline 3% to 5% in the current quarter.

How shares responded: Target’s shares jumped 12% to close at $168.58 following the release of quarterly results on Tuesday. The stock has added around 36% over the past six months.

What to watch: Investors will monitor Target’s new membership feature known as Target Circle 360, which the company is looking to launch next month. The new feature would provide its customers unlimited same-day delivery.

The markets today

The Canadian dollar will be in focus today, ahead of the Bank of Canada’s interest rate decision

Context: The CAD/USD forex pair edged lower on Tuesday, as investors assessed the latest economic data.

Details: Data released on Tuesday showed the S&P Global Canada services PMI rising to 46.6 in February, from 45.8 in January. This marked the highest reading since October. Although Canada’s composite PMI also rose to 47.1 in February, the latest reading still signalled a contraction in private sector activity for the ninth straight month.

The Bank of Canada is widely expected to hold interest rates unchanged at its meeting today. Traders expect Canada’s central bank to begin cutting rates at its June meeting.

Weakness in price of crude oil, one of Canada’s major exports, exerted pressure on the loonie. WTI crude oil prices fell 59 cents to settle at $78.15 per barrel on Tuesday.

A decline in the US dollar limited the overall losses for the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell slightly to 103.80 on Tuesday.

The CAD/USD declined by more than 0.1% to 1.3593 on Tuesday. The S&P/TSX Composite Index slipped 0.02% to close at 21,525.93.

What to watch: Investors await the release of the Bank of Canada’s interest rate decision today. The central bank is expected to keep rates unchanged at 5%. Traders will also closely monitor comments from the bank’s policymakers to get further insights into future rate cuts.

Data on labour productivity and Ivey Purchasing Managers Index will also be released on Wednesday. Analysts expect labour productivity in Canada to decline by 0.4% in the fourth quarter, following a 0.8% decline in the third quarter. The Ivey Purchasing Managers Index in Canada is expected to decline to 56 in February, from 56.5 in January.

Other Markets: European indices closed mostly lower on Tuesday, with the DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.10%, 0.30% and 0.23%, respectively, and the FTSE 100 up by 0.08%.

The news shaping the markets

The International Criminal Court (ICC) issued arrest warrants for two members of the Russian military for a missile campaign against Ukraine’s electric infrastructure. The news sent the RUB/USD slightly lower in forex trading this morning.


The American Petroleum Institute said US crude oil stockpiles rose by 0.423 million barrels in the week ending March 1, after a surge of 8.428 million barrels a week ago. The figure coming in below market expectations of an increase of 2.6 million barrels lent support to WTI crude oil prices.


South Korea’s consumer price index increased to 3.1% year-over-year in February, from 2.8% in the prior month, sending the KRW/USD pair lower in forex trading this morning.


Australia’s retail sales rose by 1.1% in January, after a 2.1% decline in the earlier month, lending support to the AUD/USD forex pair.


US ISM services PMI dipped to 52.6 in February, from January’s reading of 53.4. The latest reading also fell short of market estimates of 53 and sent the Dow Jones index lower by more than 400 points on Tuesday.

What else to watch today

Germany’s balance of trade, new passenger car registrations and construction PMI, Eurozone’s construction PMI and retail sales, France’s construction PMI, Italy’s construction PMI, UK’s construction PMI, South Africa’s business confidence, Brazil’s current account, foreign direct investment, industrial production, balance of trade, new vehicle sales and car production, India’s money supply M3, Mexico’s consumer confidence indicator, auto exports and car output, US MBA mortgage applications, ADP employment change, job openings, job quits, wholesale inventories, crude oil inventories, gasoline stocks, distillate inventories, RealClearMarkets/TIPP economic optimism index, Fed Chair Powell testimony as well as Fed Beige book, Russia’s total vehicle sales and corporate profits, as well as Argentina’s industrial production.


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