Target’s profit jumped 17% during the second quarter as its in-store pickup and same-day shipping services drew more customers, prompting the retailer to raise its outlook for the rest of the year, the company said Wednesday.
Sales at the company’s stores that have been open for at least a year grew 3.4% during the second quarter, also exceeding expectations. Target said same-day fulfillment services, including order pick up, drive up and Shipt same-day delivery business contributed nearly 1.5 percentage points of its overall same-store sales growth.
Target’s shares surged 13% in premarket trading, on pace to open at a record high.
Here’s what Target reported for the fiscal second quarter ended Aug. 3 compared with what analysts were expecting, based on Refinitiv data:
- Earnings per share: $1.82 vs. $1.62 expected
- Revenue: $18.42 billion vs. $18.34 billion expected
- Same-store sales: up 3.4% vs. growth of 2.9% expected
Target and its peers are searching for ways to make shopping more convenient. To compete with Amazon, they are improving their online stores and trying to ship faster. They are also betting that consumers do not mind visiting stores, especially when it’s faster than waiting for delivery.
“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,” Target CEO Brian Cornell said in a statement announcing the earnings results.
Net income rose to $938 million, or $1.82 a share, compared with $799 million, or $1.49 per share, a year ago. That was 20 cents better than expectations for earnings per share of $1.62, based on Refinitiv data.
Total revenue grew 3.6% to $18.42 billion from $17.78 billion a year ago, topping estimates for $18.34 billion.
Sales at Target stores open for at least 12 months and its website were up 3.4%, better than expectations for growth of 2.9%. A year ago, same-store sales climbed 6.5%. Target said traffic was up 2.4% during the latest quarter. Meanwhile, digital sales surged 34%, down from a 42% increase during the first quarter.
Like Walmart, Target is expected to have seen somewhat of a sales bump around Amazon’s 48-hour Prime Day event in early July.
Cornell said the company had “outstanding performance” during the first half of 2019, giving it the “confidence” it needed to boost expectations. Target is now calling for adjusted earnings per share to fall within a range of $5.90 to $6.20, up from a prior range of $5.75 to $6.05.
“Traffic and sales continue to grow,” Cornell said.
Target’s report comes on the heels of its bigger rival Walmart’s, which last week reported earnings that topped expectations and also raised its outlook for the year. That’s despite the ongoing threat of additional tariffs taking effect amid the U.S.’ trade war with China.
Analysts have largely expected Target to continue to see same-store sales gains, while other retailers like department store chains are struggling to draw traffic. Target also suffered a register outage during the latest quarter, but that wasn’t enough to noticeably weigh on sales.
Target’s report comes on the heels of its bigger rival Walmart, which last week reported earnings that topped expectations and raised its outlook for the year. That’s despite the ongoing threat of additional tariffs taking effect amid the U.S.’s trade war with China.
Analysts have largely expected Target to continue to see same-store sales gains, while other retailers like department store chains are struggling to draw traffic. While Target suffered a register outage during the latest quarter, which could end up slightly hitting its same-store sales, its traffic is still anticipated to climb this quarter.
Target this week announced the launch of a new grocery line, called Good & Gather, marking its biggest private-label venture to date. The retailer has been investing heavily in incubating its own brands. It’s also been investing in store remodels, opening small-format locations in major metros like New York and rolling out curbside pickup for online orders.
Target shares, which have a market cap of $44.2 billion, are up more than 30% this year.