What is Target’s view on the economy | Forexlive

Earlier this month, I wrote about how Walmart was seeing the US and global economy. In short, they highlighted uncertainty on the consumer and a cautious outlook, moderating in H2.

How about Target?

The company reported earnings today and the market likes what it heard, with shares up 2.8%.

The company highlighted that it would be shrinking inventories in a sign that they expect demand to cool. They repeatedly highlighted the same kind of uncertainty as Walmart but didn’t emphasize a current slowdown.

“The range of potential outcomes gets wider as the year goes on, given the high degree of uncertainty regarding the strength of the economy and the consumer,” said CFO Michael Fiddelke. “Given this uncertainty, we firmly believe caution is the appropriate posture, especially when planning sales and inventory in discretionary categories. As Christina mentioned, rapidly rising prices have put pressure on discretionary spending as consumers make room for higher prices on necessities. In addition, higher interest rates have further pressured budgets by increasing the cost of mortgages and car loans.”

The company followed that up by saying that its consumer was doing better than the median. How you take that might highlight the difference between reality and spin.

Perhaps the best indicator is the guidance the company offered, but again, they could be sandbagging.

“Given the current conditions we’re facing, we expect our business to generate first quarter comparable sales in a wide range, from a low single-digit decline to a low single-digit increase. This reflects our expectation for continued strength in our frequency businesses, offset by softness in discretionary categories,” said Fiddelke.

Overall, I don’t see a company offering much in the way of insight. They highlighted that the consumer mood has been shifting quickly so they’re ready to pivot towards essentials or discretionary items. That makes great business sense but it doesn’t provide us with much of a clue.

In general, running lean inventories is probably the signal here but if they turn out to be under-inventoried, that might be an upside risk in H2 or 2024.