Target Corp shares powered firmly higher in early Wednesday trading after the retailer posted stronger-than-expected second quarter earnings and boosted its full-year profit forecast in a major validation of CEO Brian Cornell’s turnaround effort.
Target (TGT) , which has been losing ground to its larger rival Walmart since the Covid pandemic changes shopping habits and Americans became more value-conscious in the face of surging inflation pressures, has overhauled its membership program, slashed grocery and house hold product prices and improved its online sales platform since the beginning of the year.
The moves look to have paid solid early dividends, with Target posting an adjusted bottom line of $2.57 per share for the three months ending in July, a tally that was nearly 40 cents higher than the Street consensus forecast and 43% higher than the same period last year.
Group revenues also impressed, with Target posting overall sales of $25.45 billion, a 4.3% gain from the same period last year that also topped Street forecasts.
Same-store sales were up 2%, the first advance in five quarters and a gain that suggests Target’s efforts to boost store traffic, with summer sales events and its revamped Target 360 program, are having an effect.
Target followed Walmart in posting better-than-expected second quarter earnings and an improved full-year profit forecast.
“We made a commitment to get back to growth in the second quarter, and the team delivered, all while expanding operating margins and growing earnings by more than 40% compared to last year,” Cornell said. “Importantly, our growth was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services”.
“Looking ahead, even as we maintain the measured outlook that has served us well, we are focused on building on this positive momentum by executing our strategy and providing the unique combination of newness and value that consumers can only find at Target,” Cornell added.
Related: Walmart stock soars to record high on Q2 earnings, profit forecast
Target also improved its full-year profit forecast, calling for earnings in the region of $9.00 to $9.70 per shares, a 10cent improvement from its prior estimate.
Target shares were marked 14.3% higher in premarket trading immediately following the earnings release to indicate an opening bell price of $163.52 each.
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Last week, Walmart unveiled a blowout second quarter that lifted its stock to a fresh record high, with sales of $169.3 billion and same-stores sales growth for its U.S. business of 4.2%.
Looking into the current financial year, Walmart sees earnings between $2.35 to $2.43 per share, up from its prior forecast of $2.23 to $2.37. Net sales will rise between 3.75% and 4.75%.
“So far, we aren’t experiencing a weaker consumer overall, [but] while we have not seen any additional fraying of consumer health in our business, other economic data out there, as well as the state of affairs globally, would suggest that it’s prudent to remain appropriately cautious with our outlook,” Walmart’s finance chief, John David Rainey, told investors on August 15.
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