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Is Target’s Disappointing Quarter An Omen For Retail Sales or An Outlier?

For a company that is literally named Target ($TGT), it sure knows how to miss the mark on quarterly earnings. While Walmart ($WMT) hits record highs, Target is taking aggressive steps to win back shoppers and reverse its 45% decline since 2021.

Spray n’ pray: In its first-quarter earnings, the retail giant failed to impress shoppers and investors — marking its fourth consecutive quarter of declining sales. Comparable sales fell 3.7% year-over-year as cost-conscious Americans turned to cheaper competitors. Even a slight uptick in discretionary spending couldn’t save the quarter — with $TGT falling 7% yesterday.

• Target’s CEO, Brian Cornell, said shoppers’ biggest challenge was “inflation in food and household essentials,” which made up 52% of the company’s 2023 revenue.

• Ahead of its paltry earnings report, the company announced price cuts on over 5K “frequently shopped items,” including “milk, meat, bread,” and more.

Shoppers finally get some relief

Target’s struggles aren’t unique. Customer trust in brands has fallen — with many businesses sounding the alarm on inflation and interest rates impacting spending. To return to growth and win back customers, companies are reversing their COVID tactics with discounts and price cuts.

• Alongside Target, furniture giant IKEA has made three rounds of price cuts on thousands of products — while other grocers like Giant Foods, Aldi, and Walmart have also reduced prices.

• Fast food chains like Wendy’s ($WEN) and McDonald’s ($MCD) are offering discounted “meal deals” to win back customers without cutting prices outright.

Data says… In the week ending May 18, same-store retail sales rose 5.5%. While this is lower than the double-digit gains during peak remote work days in 2021, it’s higher than in 2023 when retail sales went negative. Retailers might have stay-at-home shoppers workers to thank. Data from Mastercard shows that online retail shoppers spent an average of $375B above the 2015-2019 levels, with regions having a higher percentage of remote workers spending more. So you can rest knowing you’re not the only one alt-tabbing between Zoom meetings and Amazon.

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LARGECAP RECAP

🖥️ Nvidia Earnings Continue to Stun, Announces Stock Split and Dividend Boost

On Wednesday, semiconductor giant Nvidia ($NVDA) eased concerns about a slowdown in the industry with a blowout first-quarter report. The company achieved a record-breaking $26B in revenue, marking a 262% year-over-year (YoY) increase — sending $NVDA up ~4% in after-hours trading. It’s another win for Big Tech in America, signaling continued strength in the US stock market despite worries over reduced spending and prolonged high interest rates.

• 87% of Nvidia’s revenue came from its data center business, which surged 427% YoY amid the AI boom — while its gaming and automotive segments showed double-digit growth.

• Nvidia also made moves in shareholder-friendly initiatives, repurchasing over $7.7B worth of its own shares during the quarter — and announced a 10-for-1 stock split and raised its dividend by a substantial 150%, now standing at one cent per post-split share.

Forward-looking: Investors will now turn their attention to Q2, with Nvidia projecting continued fast growth. The company has issued an aggressive revenue forecast of $28B, putting it on track for its first-ever $100B revenue year. CEO Jensen Huang says, “We are poised for our next wave of growth,” and that “AI will bring significant productivity gains to nearly every industry” — but we’ll have to ask GPT-4o how it feels about that.

The play to capitalize on $100K bitcoin: With interest rate cuts on the horizon, Gryphon Digital Mining (NASDAQ:GRYP) appears well-positioned to take advantage of a crypto bull market. Read the full report here →*

Markets & Economy

United Kingdom calls General Election for Jul. 4: Prime Minister Rishi Sunak made good on a promise to hold the UK’s first election since Dec. 2019, risking his Conservative party’s control. [Read]

Economists will likely avoid recession: A National Association for Business Economics survey found that 90% of business economists predict the US will achieve a soft landing — avoiding a previously expected downturn. [Read]

Amazon ($AMZN) to launch updated Alexa: The tech giant plans to flaunt a new, paid version of its voice assistant to compete with OpenAI’s ChatGPT and Google’s Gemini. [Read]

Business & Wealth

AI Pin creator seeks buyer: Humane, started by former Apple execs, is seeking a buyer and valuing itself at $750M to $1B after its $700 AI Pin received mixed reviews. [Read]

Buy now, pay later (BNPL) companies must abide by credit card laws: The Consumer Financial Protection Bureau ruled that the BNPL industry must offer the same protections as credit card companies, including refunds, dispute investigations, and fee disclosures. [Read]

China could levy 25% tariff on EU and US cars: With the US imposing a fresh set of tariffs on Chinese automakers this week and the European Union mulling its own tariffs, the world’s second-largest economy has warned that it would retaliate. [Read]

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DIGIT OF THE DAY

Florida’s Assisted Living Costs Are on the Rise, Thanks to A 125% Increase in Property Insurance Rates

Hurricane season isn’t here yet, but Florida’s nursing homes are already facing storms. Over the years, big storms have driven up commercial property insurance costs — forcing hundreds of nursing homes to shut down. Assisted living costs have jumped from $28.8K in 2004 to $60.6K in 2023, making care less available for the state’s elderly population.

• Since 2009, 21 out of 34 Florida retirement communities failed to make their first debt payment post-pandemic, pushing the state’s senior living default rate to 18% — more than double the 8% national rate.

• Over the past five years, Florida’s commercial property insurance rates surged by 125%, causing an average of 146 nursing homes and assisted living facilities to close each year.

Stormy waters: Florida has long been a retirement haven due to its reasonable cost of living, making the tightening assisted living market even more problematic. Facilities are grappling with higher operational costs and skyrocketing insurance rates, pushing the long-term care market to the brink. These pressures have forced closures, leaving residents scrambling for limited alternatives and exacerbating an already tense situation for families and caregivers alike. With no relief in sight, Innovation Senior Living CEO Pilar Carvajal believes, “We are headed into a train wreck.”