Target was announcing expectations for an earnings decline long before the term "earnings recession" was used. Target confirmed what many investors suspected when it reported earnings in May. The company was dealing with the effects of inflation and that was affecting earnings.
TGT stock went down by 25%. TGT stock is down to around $!60 a share even though the stock is up to around $!74 a share.
It shouldn't be a surprise. Consumers are putting the brakes on discretionary spending, which is affecting retail spending. Walmart sounded the alarm for investors after Target's earnings warning.
Some investors are wondering if Target is a good stock to hold during this downturn in the market. There is a case for owning TGT stock.
The idea of a soft landing for the economy is one of the phrases making it into investor sentiment. It is thought that the economy will be able to absorb higher interest rates without tipping the economy into a recession.
I need to state that many investors and consumers think the economy is in a recession. This is the discussion that is still going on.
Many investors are warned against fighting the Fed. To not underestimate the American consumer is what I tend to follow.
I don't mean that the consumer will spend their way into oblivion The use of credit cards for everyday purchases is increasing.
The consumer has a way of keeping inflation in check before interest rates go up. Consumers were adjusting their budgets even though the Fed was still calling inflation transitory. It's my opinion that demand destruction will happen more quickly than people think.
Target has a mix of both staple items and discretionary purchases that makes it a good choice for consumers. The retailer shows year-over-year revenue growth.
Consumers will still have a reason to shop at Target even if they skip some of the discretionary items. Target is well positioned to meet consumers wherever they shop because of its leadership position in the omnichannel retail movement.
By the time Target releases its next earnings report, we will have at least one Federal Reserve meeting and at least oneCPI report. The holiday season and subsequent quarters will be helped by this data.
I apologized but I couldn't resist. One reason that investors will want to keep their TGT shares is because of this. Target is now a Dividend King. These companies have raised their interest rates for 50 years in a row.
The yield may not be impressive. The key is thePayout Target pays out $4.32 per share on an annual basis
The last three years have seen a 7.3% average of the last three years. Target has some goodwill because of the high payouts.
Target still looks like a good option for long-term investors, but you have to decide if the dividend is enough to get you interested in the short-term.