Reports of retail’s death are proving to be premature.
Target (TGT) gave investors a nice surprise on Thursday when the discount retailer said comparable sales were set to increase in this current quarter despite a downcast earlier forecast and that its profit for the period should top its own expectations. The company pointed to improvements in the number of shoppers it is attracting to its stores.
The retailer, which had previously said it expect second-quarter business to decline, saw shares jump 6% in premarket trading. Another major retailer struggling of late, J.C. Penney (JCP) similarly said earlier this week that it expects “to report significantly improved” sales this quarter compared to a poor first quarter.
At Target, which is caught in the crossfire between Amazon.com (AMZN) and and Walmart (WMT) and their price wars, has been on a $7 billion mission to improve and update its business, looking to update 600 stores, improve services like in-store pick up for online orders and build out its network of smaller stores. The company recently announced the launch of several new house brands to replace older ones that had grown stale.
Despite the promising second-quarter news, Target itself sounded a note of caution, pointing to how brutal the retail wars have been lately.
“We’ve seen additional, broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment,” CEO Brian Cornell said in a statement.
Indeed, Target has been contending with a tough war led by Walmart, forcing it to aggressively promote its own prices in its marketing campaigns. The retailer also on Thursday pointed to promising initial results from Target Restock, a next-day home delivery service being tested in its hometown market of Minneapolis-St. Paul. It is testing same-day delivery within Manhattan. The shopper traffic improvements are all the more remarkable given how little progress Target has made so far in overhauling its grocery business, a key source of shopper visits and one that takes up a lot of floor space.
But there’s a silver lining in all of the retail turmoil, Cornell recently said: The recent string of bankruptcies and store closings means about $45 billion and $60 billion in consumer spending will be up for grabs over the next three years.
