Target on track with 2Q comp acceleration

MINNEAPOLIS — July same-store sales at Target increase 4.1% on top of a prior year gain of 2%, with increase transaction size the primary driver of an increase toward the upward end of the company’s guidance.

Target had forecast an increase of low-to-mid single digits, and for the second month in a row the company’s actual result was toward the upper end of the range. Target reported a 4.5% comp increase in June, offsetting a weaker than expected showing in May to give the company an overall second-quarter same-store sales increase of 3.9% that was characterized as a meaningful acceleration from the 2% comp increase recorded in the first quarter. Target is scheduled to release second quarter results on Aug. 17 followed by a meeting with financial analysts in New York the next day.

“We’re very pleased with Target’s July sales performance, which again was at the high end of our expected range,” said Target chairman, president and CEO Gregg Steinhafel. “In addition, back-to-school sales are off to a solid start, contributing to our confidence in the strategies we have in place and our ability to execute them, especially as we head into the 2011 holiday season.”

In July, commodity categories saw the strongest growth, with grocery category comps in the mid to upper teens, while health care, beauty and household essentials increased in the mid-to-upper single-digit range. Strength in apparel continued in July, with a comparable-store sales increase just below the company average. Within apparel, the company said sales were strongest in intimate, hosiery and performance categories along with women’s and men’s apparel. The softest results were seen in jewelry and accessories.

It was a different story in hardline categories where comps decreased in the low single-digit range, with the strongest performance in sporting goods and the softest performance in music, movies and books. Comps in home were down slightly, with the strongest performance in housewares, which grew faster than the company average, and the softest performance in decorative home.

Also of note, the company reported less regional volatility in sales results, with all areas of the country experiencing same-store sales growth. Despite the broad-based strength and early success with back-to-school, Target maintained low-to-mid single-digit same-store sales expectations for August. The company’s guidance reflects a reality that even with encouraging acceleration in same-store sales trends the potential exists for uneven results in the months ahead due to persistent turbulence in the economy.