Target sales fell for the first time in 6 years, but the retailer’s stock is surging. Here’s why

Target Corporation’s stock (TGT) price has soared in premarket trading even after quarterly sales fell for the first time in six years, and the company lowered its 2023 forecast. At the time of this writing, TGT shares are up nearly 9% in premarket trading after the company released its Q2 2023 earnings. Here’s what you need to know:

What’s happened? Target released its Q2 2023 earnings before the bell this morning. Sales declined to $24.7 billion from their $26 billion haul for the same quarter a year before. That’s a decline of 4.9%. The company also lowered its guidance for its full fiscal year 2023. It now expects full-year GAAP and Adjusted Earnings Per Share of $7.00 to $8.00. Previously, that range was forecast to be between $7.75 and $8.75.
If Target’s quarter was so bad, why is TGT stock surging? The most likely reason for Target’s premarket stock surge this morning is that there was one glimmer of good news in its quarterly results. The company posted net earnings of $835 million for Q2. That is a massive leap over the $183 million in net earnings the company had for the year-before quarter. Still, although Target’s stock is getting a nice boost this morning—hovering around $136 per share at the time of this writing—TGT stock is still down significantly from its YTD high of $176 in January.
Why did Target lower its 2023 forecast? The company cited numerous reasons for its lowered 2023 full-year guidance. But two points were particularly interesting. As The Associated Press notes, Target said higher interest rates would affect its sales for the remainder of the year; if it costs people more money to add debt to their credit card balances, people are going to buy less. But the company also cited the ending of the moratorium on student loan payments, which will begin again this October. If millions of Americans suddenly have student loan payments of hundreds of dollars each month they need to make, they’ll have fewer funds to spend on discretionary items—the kinds of items Target tends to sell.
What about the backlash to Pride Month? Back in May, Target received heavy criticism from right-wing groups over its Pride displays in stores. That criticism led to calls by some conservatives to ban shopping at Target—which some did. Store employees were also targeted by harassers and some people angry about the displays even destroyed them. Target said that this backlash did, in fact, hurt early Q2 2023 sales.
What has Target’s CEO said about all this? As Yahoo Finance notes, Target CEO Brian Cornell addressed the backlash on this morning’s financial call. “Looking forward, we’ll continue to celebrate Pride and other heritage moments, which are just one part of our commitment to support diverse teams and guests. However, as we navigate an ever-changing operating and social environment, we’re applying what we learned to ensure we’re staying close to our guests and their expectations of Target.”