Target hits the bulleye in first quarter

Target’s efforts to revamp its product assortment are apparently paying off for the company, which reported a nearly 52% surge in first quarter profit on strong sales of fashion, home and beauty products.

The company posted a profit of $635 million for the three months that ended May 2. Same store sales rose 2.3%, beating forecasts. Revenue rose 2.8% to $17 billion. Online sales rose nearly 38%.

“We’re pleased with our first quarter traffic and sales, particularly in our signature categories, which drove better-than-expected profitability through improved gross margin and continued expense management,” said Brian Cornell, chairman and CEO of Target. “We’re encouraged to see early progress on our strategic priorities, including strong sales growth in Apparel, Home and Beauty, nearly 40 percent growth in digital sales, and positive traffic in both our stores and digital channels. We continue to benefit from strong execution by our stores team, who overcame weather challenges and West Coast port delays to deliver outstanding guest service in the first quarter.”

During the quarter, adjusted earnings per share from continuing operations (adjusted EPS) were $1.10, up 19.6% from 92 cents in 2014. GAAP EPS from continuing operations were $1.01, compared with 89 cents in first quarter 2014.

In providing an update on its Canadian operations, as of April 12, Target Canada completed its inventory liquidation efforts and closed the last of its 133 Canadian retail stores. A court-approved real estate sales process is underway and expected to be complete by the end of June. Consistent with expectations, after-tax losses from discontinued operations were $16 million in first quarter 2015, compared with $153 million last year. Certain assets and liabilities of Target’s discontinued operations are based on estimates.

Target also noted that it incurred breach-related expenses of $3 million in first quarter 2015, compared with $18 million of net pre-tax expense last year. Since fourth quarter 2013, Target has incurred net expense related to the data breach of $166 million, reflecting $256 million of gross expense, partially offset by the recognition of a $90 million insurance receivable.

Looking ahead to the second quarter 2015, Target expects adjusted EPS of $1.04 to $1.14, compared with $1.01 in second quarter 2014. The company now expects full-year 2015 adjusted EPS of $4.50 to $4.65, compared with prior guidance of $4.45 to $4.65.

Minneapolis-based Target Corporation (TGT) serves guests at 1,795 stores and at Target.com.