Target Corp reported a mixed bag of results for the first quarter of 2021, with a better-than-expected gross margin and a maintained full-year profit outlook. However, the retailer forecast a grim second quarter as consumers continue to shun non-essentials due to persistently high prices.
The company’s merchandise is skewed more towards discretionary products and it has been shifting focus to household essentials and groceries due to sticky inflation and higher interest rates. Target also beat analysts’ expectations for first-quarter results, with gross margins increasing to 26.3%.
The company’s shares were marginally lower in choppy premarket trading, but the maintained forecast comes as Target benefits from steady demand for beauty products and household essentials, as well its private-label brands. Even though U.S. retail sales rose less than expected in April, the underlying trend was solid pointing to strong consumer spending early in the second quarter.
Target projected adjusted profit between $1.30 and $1.70 per share, below estimates of $1.93 for the current quarter and forecast comparable sales to decline in the low-single digits. The company also said theft and organized crime could reduce this year’s profitability by more than $500 million compared to 2022.