Target Q2 Earnings: Revenue And Profit Beat, Digital Sales Boost, Annual Profit Outlook Hiked

Target Corporation TGT shares soared as the retailer’s stellar second-quarter results outperformed earnings and sales expectations and prompted an optimistic boost to its full-year profit outlook.

Quarterly adjusted earnings per share totaled $2.57 (+40%), beating the street view of $2.20. Target reported sales of $25.45 billion (+2.7%), exceeding the analyst consensus of $25.229 billion.

“Our growth was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services,” said Brian Cornell, chair and chief executive officer of Target. 

In the second quarter, Target reported a 2% increase in comparable sales, reaching the high end of the company’s expectations.

Traffic grew by 3% compared to the previous year, with all six core merchandising categories experiencing traffic growth.

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Digital comparable sales rose by 8.7%, and same-day services saw double-digit growth, with Drive Up and Target Circle 360 same-day delivery leading with low teen growth.

Discretionary sales trends continued to improve significantly, with apparel comparable sales increasing by more than 3% during the quarter.

“We also saw improving trends across our discretionary categories, most notably in apparel, and we’re seeing continued strength in beauty,” Cornell added.

The second-quarter operating income margin rate improved to 6.4%, a 160 basis point increase from the previous year, driven by a higher gross margin rate.

In the second quarter, the gross margin rate was 28.9%, up from 27.0% in 2023. This improvement reflects the net impact of merchandising activities, including cost reductions that more than offset higher promotional markdown rates.

Target exited the quarter with cash and equivalents worth $3.497 billion, with long-term debt and other borrowings worth $13.654 billion. Inventories at the end of the quarter stood at $12.60 billion.

Outlook: Target’s outlook for the third quarter adjusted EPS is projected to be between $2.10 and $2.40, compared to an estimate of $2.27. The company expects a 0% – 2% increase in its comparable sales.

Target has raised its FY24 adjusted EPS outlook to a range of $9.00 to $9.70, up from the previous range of $8.60 to $9.60. This new outlook compares to an estimate of $9.36.

While the company expects its full-year guidance range of a 0% to 2% increase in its comparable sales to remain appropriate, it now believes the increase will more likely be in the lower half of the range. 

“Looking ahead, even as we maintain the measured outlook that has served us well, we are focused on building on this positive momentum by executing our strategy and providing the unique combination of newness and value that consumers can only find at Target,” the CEO added.

Price Action: TGT shares are trading higher by 12% to $161.60 premarket at last check Wednesday.

Photo via Shutterstock

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