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Target's better than expected. Second quarter earnings come as Wall Street debates the health of the consumer. The stock has 16 hold ratings. 38 analysts cover the company. So, nearly half are rating it a hold. Now, let's compare that to Walmart, which only has three holds, just 7% of the 44 analyst ratings. Our next guest says that, uh, is actually one of those analysts with a hold on target and a buy on Walmart. Oliver Chen, TD Cowen senior research analyst joins us now. Oliver, did you see what you need to from target to change your rating, or does it change the story for you at all?

Uh, Brad, we're definitely encouraged. So comps turned positive at plus 2%, and very importantly, apparel is performing well as well as general discretionary merchandise. Um, so that's a great thing to see. It's on easier comparisons. Also, Target stock is very inexpensive relative to Walmart at 16 to 17 times PE versus Walmart's 28 times. But the consumer remains choppy. Um, we need to see continued consistency at Target. Uh, that's what we're looking for to. We're hopeful that this is a great sign of more to come. Uh, we'll see.

Oliver, what do you think this signals about back to school shopping? What it tells us about holiday shopping? You mentioned the fact that you're hopeful that that this is going to be the start of a larger trend. Just in terms of the macroeconomic picture, I guess is that make you a little bit hesitant in the fact that maybe some of those challenges aren't over here for target?

Yeah, Shauna. So today's a big retail day. Uh, for example, the Macy's comps were down 4%. Um, so what we really see is winners and losers. We see a consumer that is willing and able to spend, but they may or may not. Um, and that's really manifesting in a choppy environment. The consumer is still definitely feeling inflation. The consumer also has $700 billion of savings and the labor market's tight, which is good because unemployment is at a low level. However, credit card delinquencies are up, and the consumer is feeling very stretched. So I think it's a real mixed bag. Back to school so far from company comments has been better than feared. Uh, that's very nice as well, and apparel's a tough competitive market. For target to see some performance out of its own private brands is quite positive.

When we look across the consumer landscape here, one thing that's continuing to come up right now is this value hacking that consumers are looking to do and, and, you know, I've talked about this in the past, Oliver, how far do you see that extending into some of the larger discount retailers and, and benefiting a TJX versus benefiting, uh, department store that might have to churn through inventory just to figure out, uh, what needs to be discounted and what they could still sell at full price.

Yeah, Brad, that's a theme that you know well, a bougie on a budget, customized moderation, trading up, trading down, looking for great duplicates. Um, that's a permanent change and consumers have more transparency than ever. Uh, the real key to success in retail is value the value ratio to trend and what's being trend right. The off price market has been an exciting sector that's been constantly taking share, five to 10 years of share from Macy's and full price department stores. Consumers want a deal, they look for promotions, and retailers need to be faster and faster at the way they execute, especially relative to Amazon and Shein and others. So being trend right and offering great prices will continue to be so important. Costco's another idea that we like, and Walmarts having more and more competitive apparel offerings.