What’s going on?
Target reported better-than-expected quarterly earnings on Wednesday, as Christmas quite literally comes early for the big-box US retailer.
What does this mean?
Shortages and delays are bound to Scrooge things up over the holidays, so Americans have been doing their utmost to get ahead of them. And Target’s been happy to help: sales in the company’s existing stores climbed by a better-than-expected 10% last quarter versus the same time a year ago. Throw in online sales that came in 29% higher, and Target saw its overall revenue jump by a better-than-expected 13%. The company upped its revenue forecast for this quarter too. It’s expecting such a strong holiday season, in fact, that it’s already stocking up on products, hiring seasonal workers, and expanding its supply chains.
Why should I care?
For markets: Die a hero or become the villain.
Target, like most retailers, is contending with the rising costs of practically everything, from the goods it sells to the hundreds of thousands of people it employs. But it’s made the noble choice of absorbing some of those higher costs itself, rather than passing them on to customers and risk losing them to rivals. That drove the firm’s profit margin down last quarter, and it’s got investors worried it’ll drop even further – a possibility that led them to send its shares down 5%.
The bigger picture: America is ramshackle.
Lowe’s posted strong quarterly results of its own on Wednesday, with the DIY retailer announcing that revenue from existing stores was 2.2% higher than the same time last year. That’s especially encouraging given that the home improvement market was in full swing back then. The ongoing momentum might be because homebuyers are still taking advantage of cheap mortgages to buy new places, sure, but it could also be because – as Lowe’s CEO points out – roughly 45% of US homes are now 40 years or older, meaning there are plenty of fixer-uppers out there.
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Originally Posted on November 17, 2021 – Preseason’s Greetings
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