Target shares jump 7% as e-commerce gains fuel earnings beat

Target shares soared Wednesday after the retailer reported earnings and sales for its fiscal first quarter that topped analysts’ expectations, as it brought more people to its stores and convinced them to spend more money there.

Target’s e-commerce sales also surged 42%, as shoppers increasingly turned to its curbside pickup service for online orders, something Amazon can’t offer.

Even with the looming threat of 25% tariffs on apparel and footwear imported from China going into effect, Target maintained its outlook for the full year. The upbeat report contrasts those of department store chains earlier in the week, which largely disappointed investors.


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Target shares jumped more than 8% in premarket trading on the news.

Here’s what the big-box retailer reported compared with what analysts were expecting, based on Refinitiv data:

  • Earnings per share, adjusted: $1.53 vs. $1.43 expected
  • Revenues: $17.63 billion vs. $17.52 billion expected
  • Same-store sales: up 4.8% vs. growth of 4.2% expected

CEO Brian Cornell said Target is “well-positioned to deliver strong financial performance in 2019 and beyond.”

Net income grew to $795 million, or $1.53 per share, compared with $718 million, or $1.33 a share, a year ago. That was 10 cents ahead of analysts’ estimates.

Total revenues were up 5% to $17.63 billion from $16.78 billion last year. That beat estimates for $17.52 billion.

Sales at Target stores open for at least 12 months were up 4.8%, better than expected growth of 4.2%. This marks the eight consecutive quarter of same-store sales growth for Target. Target said traffic at stores was up 4.3%, transactions overall were up 4.3% and the average transaction amount was up 0.5%.

Digital sales surged 42%, and purchases that originate online now represent 7.1% of Target’s total transactions, up from 5.2% a year ago.

Target is still calling for same-store sales to be up a low-to-mid-single digit percentage for the year, with a mid-single digit increase in operating income, and adjusted earnings per share falling within a range of $5.75 to $6.05.

Target’s earnings follow those of rival Walmart — which showed pressure on margins easing thanks to greater sales of its in-house apparel and home brands, and private-label food options, giving the big-box retailer a boost. Target has been hoping to see more of the same results.

During the latest quarter, Target said its recently launched intimates and sleepwear brands Auden, Stars Above and Colsie were well received. The company is one of many retailers today trying to take market share from struggling Victoria’s Secret. Target also launched an environmentally friendly cleaning-products brand called Everspring this quarter.

Morgan Stanley earlier this month upgraded shares of Target, calling it a “survivor” in retail. The firm said it believed Target was beyond its “peak margin pain,” as it’s been making investments in its stores, website and supply chain, which have eaten into profits in the near term.

“Now, there are signs Target’s shipping related deleverage is narrowing, particularly as it invests in fulfillment options .. which promote higher traffic and reduce costs,” Morgan Stanley said ahead of earnings.

Target also generated buzz this month around the launch of its limited-edition line with preppy apparel and accessories brand Vineyard Vines. When items hit stores this past weekend, throngs of shoppers showed up ahead of opening hours. Target has used collaborations like this in the past to drive traffic.

As of Tuesday’s market close, Target shares are up about 9% for the year, bringing its market cap to approximately $37.1 billion. Walmart shares are up about 8.5% so far this year.

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