Target stock soars on heels of blowout quarter; raises outlook

Target Corp. hits the bull's eye in its second quarter, with results that beat the Street on nearly every metric as the retailer’s investments in its stores, online channel and private brands continue to reap benefits.

The discounter’s shares surged 20% on Wednesday, closing at a record high of $103. The company’s market value was put at $52.67 billion, up from $43.819 billion at the end of Tuesday’s trading session.

Net income rose to $938 million, or $1.82 a share, in the quarter ended Aug. 3, from $799 million, or $1.49 a share, in the year-ago period. Adjusted earnings per share of $1.82 easily topped analysts’ estimates of $1.62.

Total revenue increased 3.6% to $18.42 billion, better than the $18.29 billion analysts had expected. Same-store sales rose a better-than-expected 3.4%, driven by 2.4% traffic growth. Target’s comp sales have grown approximately 10% during the past two years — its best performance in more than a decade, the discounter said.

Comparable digital sales grew 34%, contributing 1.8 percentage points to the quarter’s comparable sales growth. Target’s same-day fulfillment services (order pick up, drive up and Shipt) accounted for nearly 1.5 percentage points of the company's overall comparable sales growth.

In comments, analyst Neil Saunders, managing director of GlobalData Retail, noted that one of the most impressive aspects of Target’s growth is that it has been driven by both the digital channel and physical stores.

“Although many in the investment community were skeptical, Target rightly understood the importance of the store to the health of its whole operation,” said Saunders. “This is why store refurbishments have been such a vital component of the success story. Our own data show that refurbishment has a positive impact on visit frequency, conversion and average ticket – and that this outpacing effect does not disappear after the first year.”

In a statement, Target chairman and CEO Brian Cornell said that the chain’s second-quarter performance demonstrates the “strength of our strategy and the durable financial model we've built over the last several years.

“By appealing to shoppers through a compelling assortment, a suite of convenience-driven fulfillment options, competitive prices and an enjoyable shopping experience, we're increasing Target's relevancy and deepening the relationship between our guests and our brand,” Cornell said. “Traffic and sales continue to grow while our EPS reached an all-time high, driven by the strength of our team’s execution and their focus on delivering for our guests. Because of our outstanding performance in the first half of the year and our confidence moving forward, we are increasing our guidance for full-year earnings per share,” he said.

For full-year 2019, Target now expects GAAP EPS from continuing operations and adjusted EPS of $5.90 to $6.20 compared with the prior range of $5.75 to $6.05.