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Sales Beat, Private Push Drive Target to Open at a Record High

Target Rises as Cheap-Chic Retailer Echoes Strong Walmart Period

(Bloomberg) -- Target Corp. opened at a record high Wednesday after meeting rival Walmart Inc.’s results with its own strong quarter, illustrating the ongoing resilience of discounters amid the struggles of the broader retail industry.

  • Comparable sales -- a key barometer of retail performance -- rose 3.4%, beating analysts’ estimates, according to Consensus Metrix. Target also raised its full-year profit forecast by 15 cents a share.

Key Insights

  • Target avoided the fate of department stores like Macy’s Inc. and Kohl’s Corp., whose sales fell short of expectations as shoppers get more cautious and Amazon.com Inc. and digital upstarts encroach on their turf. Target faced a difficult comparison with sales growth from a year earlier, which was its best showing in 13 years thanks to the demise of Toys “R” Us.
  • The grocery business -- which makes up about one-quarter of Target’s revenue but has failed to excite shoppers -- could get a boost from the September debut of Good & Gather, a new private brand that will include more than 2,000 items by the end of next year and replace existing labels like Archer Farms. Target has introduced more than two dozen owned and exclusive brands in recent years to bolster its cheap-chic image.
  • Web sales rose 34%, a strong showing though behind the pace seen last quarter. Target has invested heavily to provide more options like same-day delivery, but the expansion had eroded profitability in prior quarters. It was a different story last quarter as gross margins improved to 30.6%, thanks to cost-reduction measures.
  • Investors on Target’s call will be listening for commentary on the state of the U.S. consumer along with company efforts to counteract the latest round of tariffs.
Sales Beat, Private Push Drive Target to Open at a Record High

Market Reaction

  • Target shares climbed as much as 17% to $100.15 in New York Wednesday, the biggest one-day surge in almost 11 years. The stock had already gained 29% this year through Tuesday’s close, outpacing Walmart’s advance.

--With assistance from Karen Lin.

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson

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