10 Best Consumer Staples Stocks To Buy Now

3. Target Corporation (NYSE:TGT)

Number of Hedge Fund Investors In Q1 2024: 67

Target Corporation (NYSE:TGT) is another discount retailer. It has close to two thousand stores in the US, which makes it one of the largest retailers of its kind. This means that the firm’s share price performance is dependent on three primary metrics. These are Target Corporation (NYSE:TGT)’s retail footprint, its revenue growth, and its margins. The firm has to deliver consistently on all three to ensure sustained bullishness in its shares. Additionally, while Target Corporation (NYSE:TGT) is a defensive stock because of its business model, its revenue is also dependent on discretionary spending. This leaves the stock vulnerable to inflationary and purchasing power trends, as while it can still bring in money during a slowdown, sales can drop as well.

Target Corporation (NYSE:TGT)’s first quarter earnings reflected this headwind, as management shared during the call:

And even as inflation moderates and we see sequential improvement in discretionary category trends, higher interest rates, uncertainty around the future of the economy, continued social and political divisiveness, and the upcoming election cycles have consumers concerned about what lies ahead. In fact, consumer confidence took a meaningful dip in April despite a strong job market and normalizing inflation. And beyond the psychological toll of the current environment, the sustained level of elevated prices has had a meaningful impact on budgets and savings for many families. Currently, one in three Americans has maxed out, or is nearing the limit on at least one of their credit cards. For these reasons and more, we remain cautious in our near term growth outlook.

Notably, we expect discretionary trends will continue to remain pressured in the short term, but to normalize over time.