Target Hits Q2 Bull’s-Eye, Lifts 2018 Outlook

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Target Corp. (NYSE: TGT) reported second-quarter 2018 results before markets opened on Wednesday. The big-box retailer posted adjusted diluted earnings per share (EPS) of $1.47 and $17.8 billion in revenues. In the same period a year ago, it reported EPS of $1.22 on revenue of $16.6 billion. Second-quarter results also compare to consensus estimates for EPS of $1.40 and $17.31 billion in revenue.

Same-store sales rose 6.5% compared with the second quarter of 2017, the best in 13 years according to the company. Digital channel sales rose 41% and contributed 1.5 points to same-store sales growth. Store traffic rose 6.4% in the quarter, the best growth since 2008 when Target began reporting traffic numbers. Operating income rose by 3.6% from $1.09 billion last year to $1.13 billion.

Target also reported that its digital channel accounted for 5.6% of total sales, up from 4.2% in the second quarter of last year. For the first half of 2018, digital sales generated 5.4% of all sales, compared with 4.2% a year ago.

In its outlook for the third quarter and the second half of 2018, Target said it expects same-store sales growth of around 4.8% in both periods, matching growth for the first half of the year. For the quarter, the company expects adjusted EPS of $1.00 to $1.20. For all of 2018, Target lifted its adjusted EPS forecast from a range of $5.15 to $5.45 to a new range of $5.30 to $5.50.

Analysts had forecast EPS for the third fiscal quarter at $1.08 on revenues of $17.26 billion. For the full year, analysts are looking for EPS of $5.28 and revenues of $73.77 billion.

Brian Cornell, Target’s CEO, said:

We are extremely pleased with Target’s second quarter results, which demonstrate our guests’
excitement for the enhanced and differentiated shopping experience we’re building. For the second consecutive quarter, traffic growth is better than we’ve seen in well over 10 years, driving 6.5 percent comp growth – Target’s best in 13 years. … We’re on track to deliver a strong back half and we’ve updated our full year guidance to reflect the strength of our business and the consumer economy. As we look ahead to 2019, we expect to achieve scale across the full slate of our initiatives – creating efficiencies and cost-savings, further strengthening our guest experience and positioning Target to continue gaining market share.

Over the past 12 months, Target stock has gained about 50%, well ahead of the broad market. Shares are up 28% for 2018 to date. The stock got a nice bump in premarket trading this morning and could post a new 52-week high.

Target’s shares traded up more than 5% in Wednesday’s premarket to $87.48, above the 52-week range of $53.90 to $84.14. The consensus 12-month price target was $79.87 before results were announced.

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