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Let's talk about Target, the stock moving firmly to the downside after missing first quarter estimates and cutting its full-year sales outlook. The retailer hit by weak consumer spending, tariff uncertainty, and backlash against its DEI rollback. The stock down a little over 6%. Joining us now, Bill Kirk, Roth Capital Partners senior research analyst. Bill, great to have you on this morning. I, I want to get your reaction to this print, the uncertainty that Target talked about in comparison to what we're hearing from other retailers. Do you think that the price action of the downside is justified based off of what we got out of this print?

Uh, thanks for having me and, and yes, uh, simply put, uh, I do think the price action is, is justified. Um, you know, you kind of led with compared to other retailers and I think that's a great way to do it. If you contrast Target's results today to Walmart's last week, you see a stark difference. Uh, you know, Target comparable store sales decelerated uh, from plus 1.5 last quarter to minus 3.8 this quarter. Take Walmart. Walmart did 4.8 this quarter from 4.9 last quarter. So no change at Walmart on comparable store sales and a deceleration of five percentage points at Target. Uh, if you do profitability, Walmart earnings this quarter up year over year, slightly, but up. Target EPS, adjusted EPS, down 35% or so year over year. So I think when you contrast it against other retailers in particular Walmart, uh, the, the price action this morning is justified.

Walmart was talking about raising prices. Does Target need to do the same?

Um, Target needs to in, in the sense that input costs are going to be up for tariffs. They have a larger tariff exposure than even Walmart, but Target's in a trickier position because their assortment is a little bit more expensive and it may be priced too highly to begin with. So it's a little bit harder for them to go and raise prices when the consumer doesn't seem to love their price points to begin with. Right? So they're in a trickier kind of in between a rock and a hard place where yes, they will have to raise the prices to offset input cost inflation, but consumers are already not thrilled with their price points today.

And, and it's interesting because given the uncertainty in the macro environment, Amy Wu Silverman telling me earlier this week, this is a moment where investors are betting on management versus companies overall. Is this a moment then where Brian Cornell's leadership comes into question?

Uh, he's managed a lot of different volatile periods. So he has experience in, in these difficult periods. But I, what I would say is they keep talking about longer term, we feel great about the growth opportunities, we feel great about the, the profit opportunities, uh, but they haven't grown over the last four years, right? They haven't basically grown since 2021 and profitability is about half of what it was. So maybe longer term it's out there, but I would consider four years part of the longer term and, and they haven't had it materialize. Um, they're in a tricky position where they need to catch up to Walmart and that requires a lot of spending and they don't quite have the ammunition available for spending. Um, this goes back a few years, but in that 2021, 2022 period, they went and did 10 billion plus in share buybacks. Uh, the stock is, you know, down more than 50% since they did the 10 billion buybacks, so they, they lost a lot of money on that, on those share repurchases. Uh, but more importantly, that 10 billion would have been wonderful to invest behind the business back then on, on the technology initiatives behind pricing. Invest some of that 10 billion four years ago behind pricing and they would be in a much better spot today to compete than they are.

Bill, I was taking a look at a note from Apollo Chief Economist Torsten Sløk this morning saying that up to 10% of households in May 2025 could face a steep decline in their credit score because of what we know has been coming for a while in this student loan repayment cliff essentially. As you're thinking about that, does Target have a more outsized student loan repayment issue and problem on its hands given its mix and the overall inventory it has?

I, I, I think you're yes. Um, and I think you're right, it, it does come down to the mix. They just sell more discretionary product than a lot of the other retailers I cover, right? They sell more discretionary things you don't necessarily need uh, items. They sell more than Walmart, they obviously sell more than the, the pure food retailers like Kroger and Albertsons. So from a mix perspective relative to those names, yes, they, they would have more exposure to any sort of tightening of the budget because those discretionary items are the first thing to go. Uh, you know, they go before discretionary experiences. People don't like to cut travel and experience on the discretionary side, but they will cut discretionary physical, tangible items.