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Delayed spring takes a toll on Target even as customer traffic surges

A strong quarterly traffic gain was not enough for Target, whose profit missed Street expectations amid a late spring and higher costs.

The discounter’s net income rose 5.9% to $718 million, or $1.34 a share. On an adjusted basis, it earned $1.32 a share, below expectations of $1.39 a share.

Revenue rose 4.75% to $16.782 billion, topping analysts' forecasts of $16.5 billion.  Digital sales increased 28%, on top of 21% growth in the year ago period.

Same-store sales rose 3%. Traffic increased 3.7%, its strongest quarterly performance in more than 10 years.

“We're very pleased that our business continued to generate strong traffic and sales growth in the first quarter, as we made significant progress in support of our long-term strategic initiatives," said Brian Cornell, chairman and CEO of Target.

Target experienced strong sales growth in its home, essentials and food & beverage categories. But a late spring took a toll on temperature-sensitive categories, but sales have “accelerated rapidly in recent weeks as weather improved across the country,” Cornell said.

In the first quarter, Target completed 56 remodels and opened seven new stores. It also debuted three new brands, expanded its Restock initiative nationwide, launched its new Drive-Up service in more then 250 locations, and rolled out same-say delivery from more than 700 store, enabled by its recent acquisition of Shipt.

Neil Saunders, managing director of GlobalData Retail, commented that stores contributed 1.9 percentage points of growth to Target’s same-store sales growth, making them the lead driver of the retailer’s success.

“In our view, this completely justifies Target's decision to focus on and invest in stores - a step that was criticized by some at the time it was announced,” he said,
“There is no doubt that investing in stores was an expensive decision, but we believe….it was the right move to make.” For more, click here.

Target reaffirmed its earlier stated expectations for 2018, which anticipate comparable sales growing at a low-single-digit rate and adjusted earnings per share between $5.15 to $5.45.
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