Target Corp (TGT  ) reported first-quarter FY23 sales growth of 0.6% year-on-year to $25.32 billion, beating the analyst consensus estimate of $25.29 billion.

Comparable store sales increased by 0.7%, while comparable digital sales declined by 3.4%.

Gross margin for the quarter expanded by 60 basis points to 26.3%. The gross margin rate reflected the benefit of lower freight costs, retail price increases, lower clearance markdown rates, and lower digital fulfillment costs driven by lower digital volume and a favorable mix of lower-cost same-day services.

Operating margin was 5.2% versus 5.3% in the prior year, and operating income for the quarter declined by 1.4% to $1.3 billion.

The company held $1.3 billion in cash and equivalents as of April 29, 2023. Operating cash flow for the quarter totaled $1.26 billion.

Adjusted EPS of $2.05 beat the analyst consensus of $1.76. Inventory at the April end was $12.6 billion, down 16.3% Y/Y.

The company paid dividends of $497 million in the first quarter, compared with $424 million last year.

As of Q1 end, TGT had approximately $9.7 billion remaining capacity under the prior August 2021 repurchase program.

"As we look ahead, we now expect shrink will reduce this year's profitability by more than $500 million compared with last year," said Brian Cornell, chairman and CEO of Target.

"While there are many potential sources of inventory shrink, theft and organized retail crime are increasingly important drivers of the issue."

Outlook: Target reaffirmed FY23 adjusted EPS guidance of $7.75 - $8.75 (consensus $8.47) and expects comparable sales in a wide range from a low-single-digit decline to a low-single-digit increase.

It sees Q2 adjusted EPS of $1.30 - $1.70 against the Street view of $1.93; expects a low-single-digit decline in comparable sales.

Price Action: TGT shares are trading higher by 0.85% at $158.25 in premarket on the last check Wednesday.