Target earnings are today. Here’s what to watch

Target (TGT-0.31%) has found a way to remain competitive against retail giants like Walmart (WMT+2.97%) and Amazon (AMZN+1.44%), proving it can balance affordability with quality even in the face of rising costs and shifting shopping habits. But its latest earnings will reveal whether its recent strategies for doing so are paying off financially.

The retailer is scheduled to report third-quarter earnings on Wednesday before markets open. The results, which follow Walmart and Lowe’s (LOW-4.63%), could offer valuable insight into how consumers are navigating inflation and higher prices.

Experts are eyeing Target’s performance with cautious optimism. In a research note, financial firm Oppenheimer projects the retailer’s fiscal results to come in at the low end of its guidance range, with flat comparable sales and earnings per share of $2.10 — below Wall Street’s expectations. The firm cited higher levels of apparel clearance inventory during its store checks and a slowdown in beauty categories.

Despite these near-term hurdles, Target’s broader strategy has earned praise from experts like Greg Zakowicz, senior e-commerce expert at software company Omnisend.

“Target is likely to post another strong quarter of results, largely driven by an extended back-to-school shopping season and summertime price reductions on everyday essential items like groceries,” Zakowicz said in an email to Quartz.

But even as shoppers flock to Target for bargains, Zakowicz raises an important question: “Have they done enough with winning back customers to ward off Amazon, Walmart, and Temu this holiday season? I’m not entirely sure, but they have put themselves in a good-enough position for a successful fourth quarter.”

Target’s ability to adapt in a highly competitive retail environment is evident in its strategy to offer customers deals on essential items. In October, the retailer slashed prices on 2,000 products ranging from food and cold medicine, building on a similar markdown of 5,000 items in May. As the holiday season ramps up, this pricing strategy is likely to resonate with budget-conscious shoppers, especially as Target competes with major players like Walmart and Amazon, both of whom have rolled out aggressive discounts.

Still, Target’s recovery from earlier challenges isn’t guaranteed. Rising interest rates and changes in consumer spending could continue to impact areas like home goods, posing a further challenge, Oppenheimer notes.

Target’s upcoming earnings may reveal it has laid the groundwork for a successful fourth quarter, but to maintain its competitive edge against retail rivals, it will need to continue balancing its pricing strategy and focusing customer loyalty, the firm added. For now at least, Target plans to keep certain items like deodorant and undergarments locked away.