Target’s (TGT) losing streak is over at long last.
The discount retailer said on Wednesday that comparable sales, a key metric for retailers, rose 1.3% in the second quarter, breaking a four-quarter streak of declines and giving investors hope that Target is getting back on track after a bumpy year. The sales increase blew past the 0.7% jump Wall Street analysts were expecting, according to Consensus Metrix.
Target shares rose 4% in premarket trading.
Most encouragingly for the retailer, shopper visits were up 2.1% despite e-commerce soaring 32%. That suggests that its efforts to make the in-store experience more enticing – including better product presentation and in-store pick up services for online orders – are working. Those have been two of the biggest challenges for the company in recent quarters.
Target has made outsized bets on what it calls its “signature categories” – product areas like children’s products and health and wellness items – that it wants to dominate and that get customers into stores. It has also been refreshing some store brands and creating new ones, such as its popular Cat & Jack line of clothes for kids.
Aware of the challenges in recent quarters, Target CEO Brian Cornell sounded a cautious note even as the company raised its 2017 forecasts.
“While our recent results are encouraging, we will continue to plan prudently as we invest in building our brands, our digital channel, the value we provide our guests and elevating service levels in our stores,” he said.
Target, which is caught in the crossfire between Amazon.com (AMZN, -0.06%) and Walmart (WMT, +0.09%) and their price wars, has been on a $7 billion mission to improve and update its business, looking to update 600 stores and build out its network of smaller urban stores.
The company has also been testing new initiatives to speed up online growth: Target is testing a next-day home delivery program called Target Restock in the Minneapolis area, and is also testing same-day delivery within Manhattan. Earlier this week, the company announced the acquisition of a logistics firm.
Net income fell to $672 million, or $1.22 per share, in the second quarter ended July 29, from $680 million, or $1.16 per share, a year earlier. Total sales rose 1.6% to $16.43 billion. For the whole of 2017, the company raised its adjusted earnings outlook to $4.34 to $4.54 per share, from a previous forecast of just over $4.00. It expects sales growth for the rest of the fiscal year to be similar to the rate seen in the first half.
