Target Investors Worry About Earnings as Consumers Cut Back

As consumers cut spending, investors are reportedly worried Target’s next earnings will miss the mark.

The retailer is set to release quarterly figures Wednesday (May 17), and expectations for what those numbers will show have been set low, Seeking Alpha reported Saturday (May 13).

The report quotes Morgan Stanley analyst Simeon Gutman, who said markets are anticipating a slight decline in comparable sales for Target, as well as cautious guidance fueled by muted discretionary spending and broader economic trends.

Another possible warning sign: if the results show Target increasing markdowns and promotions more than expected.

Target had said on its last earnings call that it would begin carrying more of its private-label products priced at under $10 to attract inflation-conscious consumers.

Chief Growth Officer Christina Hennington said during the February call that the company had seen increased sales of $3 ornaments, $5 candles and $10 throw pillows.

And as PYMNTS reported, Target also noted during its call that it had benefited from increased consumer demand for both private-label products and comfort eating, as evidenced by the retailer’s Favorite Day line.

Three months later, inflation has soured consumer sentiment to its lowest point in months, according to the University of Michigan’s latest Surveys of Consumers.

As noted here Friday, the latest survey came in at 57.7, which was 9% below April’s results “amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June,” Surveys of Consumers Director Joanne Hsu said in a statement.

“Year-ahead expectations for the economy plummeted 23% from last month,” she added. “Long-run expectations slid by 16% as well, indicating that consumers are worried that any economic downturn will not be brief.”

Meanwhile, research by PYMNTS finds there are a few things consumers have been doing to cut spending as inflation hangs on: They can reduce the quality or quantity of what they buy, change merchants, or choose to do none of those things.

However, just 20% of grocery shoppers fall into that third category, meaning 80% of consumers cut back on quality or quantity of products, switched merchants, or did all three, a category that applies to 15% of consumers surveyed.

Retail products took an even bigger hit, with 85% of shoppers taking the three steps described above and more than 22% scoring the trifecta.