Target Tempers Expectations After Best Sales Gain in Years

Summary

Bloomberg Intelligence Podcast

Episode: Target Tempers Expectations After Best Sales Gain in Years
Date: May 20, 2026
Hosts: Paul Sweeney & Scarlet Fu

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Episode Overview

This episode dives into the latest retail earnings, focusing on Target’s surprising sales growth, their cautious outlook, and how their strategies compare to major competitors like Walmart and TJX Companies. The hosts are joined by analysts Jen Bartash, Barry Ross Gilbert, and Drew Redding for deep dives into Target, TJX, and Lowe’s respectively. The podcast also covers the latest in AI business litigation involving OpenAI and Elon Musk, with media litigation analyst Matthew Shenhelm.

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Target’s Earnings: Best Sales Gain in Years, Cautious Outlook

Guest: Jen Bartash, Bloomberg Intelligence Retail Analyst
[01:39–06:57]

Key Insights

• Unexpectedly Strong Quarter:
  • Target posted a “really good first quarter—much better than most people expected” (Jen Bartash, 02:03).
  • Comp sales up 5.6%, the largest increase since late 2021—“three times the average analyst estimate” (Scarlett, 02:30).
• Drivers of Growth:
  • “In part, it’s easy comparisons... but we also had the tax refund season. There were some good tax refunds out there that people were spending.” (Jen Bartash, 02:42)
  • Still, Target’s guidance for the rest of the year was barely adjusted, signaling a conservative outlook.
• Cautious Guidance:
  • “They really didn’t nudge much with regards to their guidance... a very conservative outlook for the rest of the year.” (Jen Bartash, 02:03)
  • "It’s only one quarter... three more to go. Let’s see where we go.” (Jen Bartash, 03:24)
• Strategy & Turnaround:
  • Refocusing on categories like baby, beauty, and health & wellness, “where they think they can be differentiated and bring people back into stores.” (Jen Bartash, 04:12)
  • Supply chain improvements are starting to result in better in-store product availability.

Notable Quote

"Those are the kinds of... small wins that Target is starting to see that are helping to build a little momentum."
—Jen Bartash [04:48]

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Target vs. Walmart: Changing Roles in Retail

[05:10–06:57]

• Walmart has moved into traditionally Target-dominated spaces, especially apparel:

  • “Walmart has gone from being content with fashion basics... to being more fashion forward.” (Jen Bartash, 05:24)
  • Increased competition as Walmart narrows the gap in “aspirational” shopping.

• Inflation’s Impact:

  • “We haven’t seen consumers have a huge reaction yet to the higher gas prices... it’s usually when gas prices are at a high level for a sustained period of time that you start to see consumer behavior shift.” (Jen Bartash, 06:08)
  • As inflation persists, shoppers tend to consolidate trips, favoring multipurpose retailers like Walmart and Target.

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TJX Companies: Off-Price Leader’s Winning Model

Guest: Barry Ross Gilbert, Senior Equity Analyst
[09:20–13:58]

Key Insights

• Strong Quarter & Conservative Guidance:

  • "TJX is known for executing seamlessly... you expect them to beat every time." (Barry Ross Gilbert, 09:52)
  • Like Target, benefited from strong tax refund season.

• Differentiators:

  • TJX cycles positive comp sales over three years, versus Target cycling a decline.
  • Strength is in their off-price model—consistently executing and capitalizing on excess and luxury inventory.
  • Shoppers find high-end brands, e.g. “a lot of product from Celine, Gucci, Yves Saint Laurent” at discount prices. (Barry Ross Gilbert, 11:34)

Notable Quote

"We're continuing to see a lot more luxury merchandise... It's amazing how much is out there in luxury and we're seeing that luxury is off right now, so now you can get it at discounted prices at TJX."
—Barry Ross Gilbert [11:44]

• Growth Strategy:
  • Store openings remain the primary expansion method:
    • "They're expecting to open somewhere around... seven thousand stores so they still have about seventeen thirty-eight to go." (Barry Ross Gilbert, 12:42)
  • International expansion (joint ventures in the Middle East, entry to Spain).
  • Digital growth is less emphasized than physical footprint.

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Lowe’s & The Home Improvement Sector: Cyclical Waiting Game

Guest: Drew Redding, Homebuilding Analyst
[16:51–20:30]

Key Insights

• Stable but Challenged Quarter:

  • Q1 came in line, with 0.6% comp sales growth; guidance for flat to 2% growth maintained.
  • “Underlying trends in the business are relatively stable but... still reflect a number of challenges.” (Drew Redding, 17:09)

• Housing Market Headwinds:

  • Existing home sales remain ~20% below normalized levels. “We haven’t seen that meaningful lift in spring demand we were hoping for.” (Drew Redding, 17:09)
  • High interest rates and consumer uncertainty weigh on spending, especially in big-ticket categories.

• Pro Segment Investment:

  • Lowe’s is preparing for a market upturn by investing in products and loyalty programs for professional customers, as well as making acquisitions to access new markets (LBM, ADG).

Notable Quote

"It's really about positioning themselves for the next leg of growth when the housing market and the consumer start to come back."
—Drew Redding [18:33]

• Outlook:
  • Slight optimism for existing home sales to rise modestly as more inventory comes to market, which may temper home price inflation but won't quickly shift results for home improvement retailers.

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AI Litigation: Elon Musk vs OpenAI

Guest: Matthew Shenhelm, Media Litigation Analyst
[23:26–29:17]

Key Insights

• Lawsuit Overview:
  • Elon Musk lost his case against OpenAI, which had reached trial—an unusual event for such a high-profile corporate dispute.
  • Musk sought strict limitations on OpenAI, arguing it violated a supposed "charitable trust" by pivoting to a for-profit model.
  • The jury, and the judge, sided with OpenAI primarily on statute of limitations grounds: Musk filed “too late.” (Matthew Shenhelm, 25:29)

Notable Quote

“This is a big step forward for OpenAI in avoiding this overhang.”
—Matthew Shenhelm [24:17]

• Impact on OpenAI:

  • The verdict enables OpenAI to pursue further commercialization—potentially an IPO—without the threat of Musk’s demanded remedies.

• Likelihood of Successful Appeal:

  • “Most appeals fail... here, the factual question is what did Musk know and when did he know it. That’s going to be a tough thing for three appellate judges to second-guess.” (Matthew Shenhelm, 25:29)
  • Musk remains a “significant underdog” at the appellate stage.

• Lasting Effects:

  • The case highlighted transparency and governance issues at OpenAI, but ultimately Musk’s loss “is a big win for OpenAI.” (Matthew Shenhelm, 26:46)
  • OpenAI's hybrid for- and non-profit model is validated by the court.

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Memorable Quotes & Timestamps

• Target’s Guidance:

  “It’s only one quarter... three more to go. Let’s see where we go.”
  —Jen Bartash [03:24]

• TJX Luxury Product Availability:

  “A lot of product from Celine, Gucci, Yves Saint Laurent…it’s amazing how much is out there in luxury and we’re seeing that luxury is off right now, so now you can get it at discounted prices at TJX.”
  —Barry Ross Gilbert [11:44]

• Home Improvement: Waiting for the Cycle:

  "It's really about positioning themselves for the next leg of growth when the housing market and the consumer start to come back."
  —Drew Redding [18:33]

• AI Lawsuit:

  “This is a big step forward for OpenAI in avoiding this overhang.”
  —Matthew Shenhelm [24:17]

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Important Segment Timestamps

• 01:39 – Target’s Q1 earnings results
• 02:42 – Drivers of Q1 sales growth, sustainability concerns
• 04:05 – Target’s turnaround strategies
• 05:10 – Target vs. Walmart competitive dynamics
• 06:08 – Inflation and gas prices’ impact on consumer behavior
• 09:20 – TJX Companies: Earnings and growth strategy
• 11:34 – TJX’s luxury inventory dynamics
• 12:42 – TJX’s store expansion plan
• 16:51 – Lowe’s Q1 review and housing market analysis
• 18:33 – Lowe’s investments for long-term growth
• 23:26 – Elon Musk vs OpenAI lawsuit outcome
• 25:29 – Appeal prospects and legal analysis
• 28:01 – Implications for OpenAI’s business model

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Conclusion

In this episode, Bloomberg Intelligence analysts break down the latest in retail earnings and strategies, highlighting Target’s conservatism despite strong sales, the off-price resilience of TJX, and the cyclical patience needed for Lowe’s and the home improvement sector. The show closes with a deep dive into the Elon Musk vs. OpenAI lawsuit, explaining why the result clears the way for OpenAI’s future and clarifies the boundaries of “public good” vs. “for profit” in AI companies.

Transcript

[Scarlett]

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[Bloomberg Intelligence Host]

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[Paul]

i'm looking at target reported earnings strongest sales gain in years but they're a little cautionary i think in their guidance here the stock's down six percent here today although it's up twenty two percent year to date jen bartash as she covers this part of the retail space for bloomberg intelligence she joins us from the bi offices in princeton new jersey jen talk to us about target what did they report what's their outlook yeah

[Jen Bartash]

hi paul so target had a really good first quarter much better than most people expected and i think that it really is a reflection that some of the tactics they're putting in place as part of their turnaround are taking hold hold and that consumers are responding but as you kind of sort of implied in your introduction they really didn't nudge much with regards to their their guidance in response to a strong fiscal first quarter and so i think people are looking at that as a very conservative outlook for the rest of the year

[Scarlett]

the comp sales for the quarter that ended was pretty eye opening up five point six percent that was the biggest increase since the end of twenty twenty one and also three times the average analyst estimate is this more than just

[Jen Bartash]

easy comparisons well in part scarlett it's easy comparisons but we also had other things like the tax refund season there were some good tax refunds out there that people were spending there were a few of those sort of tailwinds and so when you when you strip that out it's really about you know how much of this is sustainable going forward and because the company didn't really adjust much of their guidance for the balance of the year it really implies that that pace of same store sales is going to drop way off starting in second quarter still positive but in the very very low single digit range right

[Scarlett]

could this be a case of target managing expectations to lower the bar so much that it becomes an easy beat

[Jen Bartash]

later on i think that it's not necessarily trying to really under under underestimate but i think there is a level of conservatism there and that's just really based out of the track record that they've had when they go too soon and raising guidance they get held with their feet to the fire and then if they for some reason don't meet that the stock gets hit even harder and so i think that there's that level of prudence in there of saying it's only one quarter there's four quarters in a year three more to go you know let's let's let's see where we go now if we get to second quarter and they have strong results and they don't make an adjustment then i would say that they're definitely sort of under under promising so they can

[Paul]

over deliver talk to us about this the turnaround what is target trying to do and are they making any headway

[Jen Bartash]

there yeah so you know a lot of the issues with target you know they sort of lost their their way with what they used to deliver in that sense of like target and the joy and the discovery and so they're going back into sort of key key topics and key categories where they think that they can be differentiated so things like baby things like beauty areas of health and wellness where they think that they can have a competitive advantage and bring people back into stores so they've been changing their assortment changing what's in the stores and at the same time i think what's maybe underappreciated is the amount of work they've done with their back house operations in terms of supply chain to really improve availability of products in the stores there's nothing more worse than a bad experience when you go in looking for something and it just isn't even there so those are the kinds of like small wins that target is starting to see that it's helping to build a little bit of momentum

[Scarlett]

yeah the comparison between target and wal mart always seemed to be that target appealed to the aspirational shopper in a way that wal mart hadn't quite mastered have those roles reversed i mean walmart we keep hearing about how there's a lot of customers trading down to walmart

[Jen Bartash]

now yeah i would say walmart has definitely invested in recent years in categories where target had always been a leader apparel is a really good example of that so you know walmart has gone from being content of just being a fashion basics where you go to buy your socks and your underwear to being a little bit more fashion forward and they have seen their apparel sales improving so there's there's definitely more competition for target in areas where they used to have a historical advantage but we'll see whether this new refresh is going to be enough to overcome anything that they've

[Paul]

lost jen you talk to a lot of these retail companies what are they saying about the inflation we're seeing out there in the economy particularly at the

[Jen Bartash]

gas pump yeah it's a great question paul and you know there are some some reports out there that say that we haven't seen consumers have a huge reaction yet to the higher gas prices when we look back historically it's usually when gas prices are at a high level for a sustained period of time that you start to see consumer behavior shift and that shift really takes place into going fewer stops fewer retailers maximizing your trips that sort of thing it's still a little early to see that much of a consumer reaction to high gas prices which is why we haven't really seen that flow through in results yet but the longer gas prices stay higher the more that actually is an advantage to companies like walmart and target that have that broad assortment where people can make one stop and shop in multiple categories stay with us more from

[Scarlett]

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[Paul]

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[Bloomberg Intelligence Host]

you're listening to the bloomberg intelligence podcast catch us live weekdays at ten am eastern on apple carplay and android auto with the bloomberg business apple listen on demand wherever you get your podcasts or watch us live on

[Scarlett]

youtube let's talk about tj x the owner of tj max and in the uk i think it's tk max yeah i don't know why they changed a letter there but barry ross gilbert probably knows she is our senior equity analyst covering retail and tjx this morning came out with good earnings hiking its sales outlook a real contrast to target but mary this is a very different company because this is a off price retailer as opposed to target which has its own brands and doesn't claim to be

[Barry Ross Gilbert]

off price that's exactly right scarlet really the big difference here also is on the execution side tjx is known for executing seamlessly so they also guide conservatively and you expect them to beat every time and they also surpass analyst estimates because analyst estimates are usually a tad above the guidance that the company provides so yeah there was a lot of strength in the quarter and i think both tjx and also target benefited from higher tax refunds in the quarter and it does appear that target is improving their execution but they're also cycling a three year stacked comp sales decline of seven point four four percent whereas tjx is cycling a three year stacked comp sales increase of over nine percent again the difference in the execution and the appeal of off price and especially now that consumers are having to cope with higher gas prices and then as earlier in your just recent broadcast there you were talking about how the implications for that are raising costs of some products and also you know we could get freight right now we're not seeing that because there's been some hedging in place for example with target that was one of the benefits in their margin in the quarter was on the freight side freight hedging mary is there anything that

[Scarlett]

tjx isn't doing well you mentioned execution has been flawless but that's kind of what investors expect from this company what could it be doing better where is it perhaps leaving money on the table

[Barry Ross Gilbert]

yeah that's a good question scarlett it seems i can't see where they're really leaving money on the table at this juncture and if anything what we continue to see every single quarter is the availability of excess merchandise and this is across brands that spend you know that span the appeal from consumers at the very low end to consumers at the very high end so we're continuing to see a lot more luxury merchandise it looked like in some of these shopping halls that were posted there's a lot of product from celine gucci yves saint laurent i mean it's amazing how much out there in luxury and we're seeing that luxury is off right now and so now you can get it at discounted prices in the off price channel at least with tjx and their runway

[Paul]

model what's the growth strategy for a company like tjx is it more stores is it driving digital growth is it raising average selling price what's kind of the growth story for a company like

[Barry Ross Gilbert]

tjx yeah so paul that's a good question for them it's really continuing to expand so that is opening up new stores and they are opening up more newer stores this year i think they have on target over one hundred but they're also expanding internationally which is why they have these joint ventures in the middle east and they just entered spain this year so that's a new market for them and then of course they also have an investment in mexico so they're sticking with the off price channel but expanding around the globe and part of the reason why they're doing that is because they have seasoned executives that want to take on more responsibility and this is a way to do it so they continue to see a long runway not only in north america for example they're expecting to open somewhere around i think it's like seven thousand stores so they still have about seventeen thirty eight to go so they have a big runway so still okay and that and by the way they keep moving that target right as they see more and more opportunities stay with us more

[Paul]

from bloomberg intelligence coming up after this support for the show comes from public lately it feels like there are two types of investing platforms some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game public public is positioned differently it's an investing platform for people who are serious about building their wealth on public you can build a portfolio of stocks options bonds crypto without all the bugs or the confetti retirement accounts yep high yield cash yes again they even have direct indexing public has modern design powerful tools and customer support that actually helps go to public dot com market and earn an uncapped one percent bonus when you transfer your portfolio that's public dot com market ad paid

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[Bloomberg Intelligence Host]

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[Paul]

youtube all right folks our next segment is sponsored by john tucker and all the do it yourself people out there drew redding joins us here at bloomberg intelligence home building analyst lowe's reported some numbers there drew all those crazy people that actually do the work on their own homes are they still buying stuff

[Drew Redding]

it was the largely in inline quarter for lowe's zero point six percent comp on same store sales they maintained their four four year guidance calling for for flat to two percent growth which i think was encouraging so underlying trends in the business are are relatively stable but i think that still reflects a number number of challenges out there the most important being what we're seeing in the housing market turnover still we about twenty percent below normalized levels we haven't seen that meaningful lift in spring demand that we were hoping for and now we have rates back up to six and three quarters percent on housing at least in the near term at the same time we've got consumer uncertainty you know whether people are concerned about the outlook for economic growth the outlook for employment now we have these geopolitical tensions so all these are kind of of weighing on that diy consumer and where we're seeing it most importantly is is in a pullback in spending in those bigger ticket discretionary categories so for companies like

[Scarlett]

lowe's and home depot they kind of have to wait out this cycle they have to wait for things to improve and that's that's a cyclical headwind that they really have no control over where they do have control over is to create more productivity create more efficiencies what is lowe's doing on that front

[Drew Redding]

yeah so you make a great point is they really can't battle what's happening in the housing market what they have been doing is investing for when the market eventually turns and where we've seen it from both retailers is really on the pro side so lowe's have done has done a lot of investments you know in crafting kind of a portfolio of products that the pros really demand they've worked hard on building out a loyalty program they've done two pretty significant acquisitions of lbm and adg which will give them exposure not only to kind of the larger pro where there's somewhat of an untapped addressable market for both of those retailers but it'll also give them exposure to the homebuilding space which is an area that they have historically had no exposure now as we've discussed before the new home market is under similar pressure we're seeing housing starts actually contracting but but as you mentioned it's really about positioning themselves for the next leg of growth when the housing market and the consumer starts to come back existing

[Paul]

home sales bumping along around four million per year where should that number be in a healthy market yeah so we've

[Drew Redding]

been there for a couple of years we're about to twenty percent or so below normalized levels so we should be you know somewhere around the five million mark you know i think the fact that we've been bumping bumping along these levels with all of the different challenges that we've had you know from rates to economic uncertainty to geopolitical uncertainty tells us that we're at a bottom you know we think that we can grow existing home sales low single digits in twenty twenty six as more inventory starts to come onto the market that's likely to come at the expense of home prices which you know as we know are up over fifty percent over the last several years so you know for the home improvement retailers the the headwind it with the existing home market has started to fade but it just hasn't emerged as a catalyst for growth stay

[Paul]

with us more from bloomberg intelligence coming up after this support for the show comes from public lately it feels like there are two types of investing platforms some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game public is positioned differently it's an investing platform for people who are serious about building their wealth on public you can build a portfolio of stocks options bonds crypto without all the bugs or the confetti retirement accounts yep high yield cash yes again they even have direct indexing public has modern design powerful tools and customer support that actually helps go to public dot com market and earn an uncapped one percent bonus when you transfer your portfolio that's public dot com market

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[Bloomberg Intelligence Host]

you're listening to the bloomberg intelligence podcast catch us live weekdays at ten am eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube

[Scarlett]

we are an ai obsessed market in every way whether it's talking about companies that are making some changes to staffing because of spending due to ai or awaiting nvidia's results or watching a legal case involving openai and elon musk and it's really that one that i want to pick up on because that's what going on for a couple of weeks and it's really captured a lot of people's attention to billionaires duking it out and it looks like elon musk lost and he says he's going to appeal i want to get a better understanding of what this lawsuit means and what it allows for matthew shenhelm is our media litigation analyst at bloomberg intelligence he is joining us right now from washington dc so is it as simple as matthew elon musk lost sam altman won so now openai can go public i

[Matthew Shenhelm]

think that's the big takeaway from this it's not completely over yet as you said elon musk has vowed to appeal this this decision on monday but at this stage things are looking much better for open air this was this was a pretty serious case because it had advanced this far the judge had let it clear a motion for to dismiss a mot motion for summary judgment let it go all the way to trial and musk was seeking pretty severe remedies against openai not just over one hundred billion dollars in potential damages but limits on the company's ability to seek private investor returns musk wanted the company to be limited to serve the good of the world first and foremost and effectively that would cap private investor returns doesn't really work for for an ai company so musk losing this with this jury decision that the judge adopted on monday is is a big step forward for openai in avoiding this overhang elon musk

[Paul]

says he's going to appeal i know you have opinions on how successful appeals may be what do you think in

[Matthew Shenhelm]

this case yeah so i think it's going to be an uphill battle for musk at this point most appeals fail and here this appeal would go to the ninth circuit court of appeals

[Scarlett]

would

[Matthew Shenhelm]

be limited to arguing that the jury and then the judge got it wrong on the statute of limitations the jury said musk filed this suit too late and there's a three year statute of limitations for breach of charitable trust claims typically appeals courts look at legal questions was the judge right on that three year test as being the controlling law where appeals courts have trouble and have limited ability to intervene is factual questions and here a jury took up the factual question of what did musk know and when did he know it and getting into the nitty gritty of that their conclusion that he should have sued earlier because he knew about any alleged wrongdoing earlier that's going to be a tough thing for three appellate judges to second guess because they tend to defer on factual questions so i would think musk is a pretty significant underdog as this case goes to appeal so what

[Scarlett]

did elon musk get out of this trial this case well i mean in

[Matthew Shenhelm]

any way he put a lot of pressure on openai i think some have argued that that sam altman he had a very difficult cross examination and maybe there were questions raised about his his truthfulness some may view and some some may suggest may maybe openai isn't as pleasing a place for investment going forward based on that leadership i think this was was certainly motivated arguably by musk's desire to compete with this company since he's no longer tied to it and you could you could argue that maybe this you know cast some dirt at the company in a way that that that you know may may have set it back slightly but i more likely than not i think musk losing this case is the big take that's a big win for openai and unless he can overturn that i think openai moves ahead and i don't think musk gets all that much at the end of

[Paul]

the day so at the heart of this though was whether openai should be i guess a kind of for the public trust or is it a profit making institution where does that whole concept stand that whole argument because again we may see openai tried to go public

[Matthew Shenhelm]

here exactly so the argument was a very unique one that this was a breach of a charitable trust that openai basically created a charitable trust when it started as a nonprofit seeking to benefit the world and musk's claim was that that by moving to a for profit model that breached that charitable trust and that openai couldn't move ahead to seek private investor returns because of how it started up what musk never really had though was any sort of written documentation there's no trust agreement that that says that what was sort of piece together conversations and corporate filings and things like that to try to make that argument so it was it was never a real airtight case on musk's part and so what this frees openai to do is to go ahead to to have a for profit component it still has the charity it still has the not for profit but it also has a secondary piece the for profit model which fuels the business brings in the money needed for an ai company to work and so now that business model can proceed full speed ahead with this case out of the way this is the

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