Updated at 8:13 AM EDT
Target shares rose steadily in trading Wednesday after the retailer posted stronger-than-expected fiscal second-quarter earnings and raised its full-year profit forecast in a major validation of CEO Brian Cornell's turnaround effort.
Aim (TGT) Walmart, which has been losing ground to larger rival Walmart since the Covid pandemic upended shopping habits and Americans became more value-conscious in the face of rising inflation, responded by overhauling its membership program, cutting prices on grocery and household products and improving its online sales platform this year.
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The various moves appear to have paid off handsomely early on, with Target posting an adjusted bottom line of $2.57 per share in the three months ending in July. That was nearly 40 cents higher than the Wall Street consensus forecast and 43% higher than the same period a year earlier.
Group revenue also impressed: Target posted $25.45 billion, up 4.3% from the same period last year and also above Wall Street forecasts.
Same-store sales rose 2%, the first advance in five quarters and a gain that suggests Target's efforts to boost store traffic, with summer sales events and its revamped Target 360 program, are having the desired effect.
“We committed to returning to growth in the second quarter and the team delivered, while expanding operating margins and increasing earnings by more than 40% compared to last year,” Cornell said. “Importantly, our growth was driven entirely by in-store traffic and our digital channels, with double-digit growth in our same-day delivery services.
“Looking ahead, while we maintain the measured outlook that has served us well, we are focused on building on this positive momentum by executing on our strategy and providing the unique combination of newness and value that consumers can only find at Target,” he added.
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Target also raised its full-year earnings forecast, estimating earnings in the range of $9 to $9.70 per share, up 10 cents from its previous estimate.
Target shares rose 13.6% in premarket trading immediately after the report to open at $164.02 each.
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Walmart posted a spectacular second quarter
Last week, Walmart reported a spectacular second quarter, a report that sent its stock to a record high: revenue of $169.3 billion and same-store sales growth in its U.S. business of 4.2%.
For the current fiscal year, Walmart expects earnings of $2.35 to $2.43 per share, up from its previous forecast of $2.23 to $2.37. Net sales will rise between 3.75% and 4.75%, according to estimates from the Bentonville, Arkansas-based chain.
“We are not experiencing a softening of the overall consumer at this time, (but) while we have not seen any further deterioration in consumer health across our business, other economic data, as well as the situation globally, would suggest that it is prudent to remain appropriately cautious with our outlook,” Walmart Chief Financial Officer John David Rainey told investors on Aug. 15.
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