Earnings could be a little better. Analysts estimate adjusted earnings will be $1.43 per share, up from 39 cents per share a year ago.

Still, investors are concerned that the company’s results could underperform, with “extremely negative” street sentiment heading into Wednesday’s earnings report, Oppenheimer analyst Rupesh Parikh wrote.

Investors in our talks remain bearish on TGT in the near term
Prospects.” “Amid these factors, we have less confidence in the share price reaction to print.”

Analysts were lowering their price target estimates ahead of the earnings report. As of Tuesday, the average price target was $157.81, down from $170.39 on July 31, according to FactSet.

This summer alone hasn’t been tough for Target — the past year has been challenging for the retailer. In 2022, Target had to cut its guidance twice and miss its earnings forecast three times.

2023 has never been kinder. The stock fell in May after Target’s first-quarter earnings report after the company released second-quarter guidance that fell short of Street expectations. This led to a nine-day losing streak, exacerbated by Target’s decision to change or remove certain products from Pride’s annual collection in response to backlash from some of its customers.

Target shares are down 15% this year, and have shed 30% of their value in the past 12 months.

The controversy over Pride may reach far beyond Target’s stock price. Wells Fargo analyst Edward Kelly thinks it likely reduces store traffic and sales, and could prompt the company to lower its guidance for the fiscal year. Right now, the company expects comparable sales to range from low single-digit percentage decline to low single-digit percentage increase, operating income growth of more than $1 billion, and earnings between $7.75 and $8.75.

On top of the backlash from Pride, Target has struggled to navigate the macroeconomic environment. As inflation and interest rates continue to rise, consumers are spending less on discretionary purchases, such as home furnishings and electronics — a strength of Target — and spending more on food and other necessities.

Until consumers show “sustained interest” in these discretionary categories, it will be difficult for Target to increase sales, JP Morgan analyst Christopher Horvers wrote in a note to clients. But a recovery in discretionary spending may take some time to materialize. Economists expect consumer demand to weaken in the second half of the year, affected by the resumption of student loan payments, rising credit card balances, and slowing wage growth.

While Target’s near-term prospects look bleak, some analysts, including Barrick Oppenheimer, still believe the company is well-positioned over the long term.

“For the long-term players, we will continue to benefit from dips and
Currently low rating,” he wrote.

Write to Sabrina Escobar at sabrina.escobar@barrons.com