Target reported earnings, revenue and same-stores sales on Wednesday that topped analysts’ expectations for the second quarter, fueled by a jump in online transactions.
With more shoppers returning to its brick-and-mortar stores and ringing up purchases on Target.com, the discount retailer raised its outlook for 2017, as signs appeared that its turnaround efforts are making progress.
Shares of Target were last climbing around 5 percent in premarket hours on the news.
Here’s what Target reported compared to what Wall Street was expecting, based on a Thomson Reuters survey of analysts:
- Earnings of $1.23 a share, adjusted, compared with a forecast profit of $1.19 per share.
- Revenue was $16.43 billion versus an estimate of $16.30 billion.
- Same-store sales climbed 1.3 percent, better than the expected 0.7 percent growth.
“We are pleased that second-quarter traffic increased more than 2 percent, reflecting growth in both our store and digital channels,” CEO Brian Cornell said in a statement.
“We continue to focus on our long-term strategy. … While our recent results are encouraging, we will continue to plan prudently as we invest in building our brands, our digital channel, the value we provide our guests and elevating service levels in our stores.”
Target’s second-quarter revenue increased 1.6 percent from a year ago, to $16.43 billion.
Net income fell to $672 million, or $1.22 per share, in the second quarter, from $680 million, or $1.16 per share, during the same period last year. Excluding one-time charges, the big-box retailer earned $1.23 per share.
Sales from Target stores open more than 12 months rose a better-than-expected 1.3 percent, following a year of declines and amid growing skepticism about the retailer’s turnaround efforts.
Target’s comparable digital sales increased 32 percent, as the retailer has also been making heavy investments online.
Looking ahead, Target has updated its outlook for the third quarter, now expecting to earn between 75 cents and 95 cents a share. Analysts were calling for third-quarter earnings per share of 77 cents, according to Thomson Reuters.
For the full year, Target has forecast earning between $4.34 to $4.54 per share. Analysts polled by Thomson Reuters had called for earnings per share of $4.39 in 2017, falling on the lower end of Target’s updated range.
Target recently embarked on its plan to invest more than $7 billion in capital in itself over the next three years, in order to “evolve” to meet consumer preferences.
The retailer hopes that by rolling out 12 original brands over the next two years — building on the success of its Cat & Jack children’s line — this will drive more shoppers back to stores. Digital initiatives to grow online sales are also top of mind.
Until this past Monday, Target had so far been on the sidelines as far as deals go, while retail rival Wal-Mart has made acquisitions big and small, ranging from that of Jet.com to apparel e-retailer Modcloth. But earlier this week Target announced plans to scoop up transportation technology company Grand Junction, with the goal of growing its same-day delivery service.
“The deal should help TGT manage its fleet of transportation assets as it looks to harness the power of its physical and digital assets to improve its store experience and deliver products to customers,” UBS analyst Michael Lasser wrote in a note to clients.
Target has also added two new executives, Mark Kenny and Liz Nordlie, to its food and beverage team. Kenny joins Target from Wal-Mart, and Nordlie from General Mills.
The recent announcements, particularly as they relate to Target’s grocery business, are welcomed by analysts who have been waiting for the big-box retailer to make a move.
Target also on Wednesday updated analysts and investors regarding its plans to roll out smaller-format stores and remodel its big boxes this year.
Target said it completed remodels on 42 of its existing stores during the second quarter of 2017 and will now remodel more than 300 stores in 2018. The company was originally planning to only upgrade 250 locations by the end of next year.
The retailer will nearly double its number of smaller-format stores this year, with 15 new locations announced for 2018 and “more to come,” Target said on Wednesday. CEO Cornell has said these stores contribute more than double the per-foot sales productivity of bigger locations.
As of Tuesday’s market close, shares of Target have fallen 28 percent over the past 12 months. The S&P 500 Retail ETF (XRT) meantime has dipped about 16 percent lower over the same period.