Target is a consumer discretionary name that we believe will recover later in 2023 and 2024 and await better entry points for this growth story.

Target Corp. (TGT) $Target(TGT.US)$ reported stronger-than-expected Q1 results with an Adjusted EPS of $2.05, outpacing the Street's expectation of $1.77. Improved gross margin largely contributed to the robust results. Same-store sales remained flat, reflecting strength in higher-frequency categories such as Beauty, Food & Beverage, and Household Essentials, balanced by softer performance in discretionary sectors. While the retailer saw an uptick in customer traffic, this was offset by a slight decrease in ticket sales. Digital sales also took a hit due to intense competition. Despite maintaining its full-year guide, Target's Q2 outlook fell short of expectations. The company is also facing challenges like potential margin structure impairments from higher costs and aggressive competition, prompting us to maintain our neutral position. Gross margin pressures from labor costs, e-commerce growth, and competition pose downside risks.