Target beats Street in Q2, raises guidance
Target Corp. rebounded from a disappointing first quarter of fiscal 2024 with a return to growth in sales and earnings.
The discount giant, which reported declining net income and total revenue in the first quarter, reported second quarter net earnings of $1.19 billion, up 43% from $835 million the same quarter of 2023. Adjusted earnings per share (EPS) rose to $2.57 from $1.80.
Meanwhile, total revenues climbed 3% to $25.45 billion from $24.77 billion. Comparable sales increased 2%, at the high end of the company’s previously released guidance.
In other favorable results, traffic grew 3% in the second quarter as compared to the prior year, with all six core merchandising categories delivering traffic growth. Digital comparable sales grew 8.7% and store comparable sales rose 0.7%, Same-day services saw double digit growth, led by low teens growth in drive up and Target Circle 360 same-day delivery.
The quarter also saw the retailer host its annual Target Circle Week sales extravaganza, which is exclusive to members of the Target Circle loyalty program. Target said Circle Week drove higb engagement across all categories, with more than 2 million new members joining during the quarter.
[READ MORE: Target counters Prime Day with weeklong sales event]
"Target’s first positive same-store sales results in a year and good operating growth in the second quarter support Fitch’s view that the company can maintain its strong connection with consumers while executing on cost controls in a dynamic environment," David Silverman, senior director, Fitch Ratings, said in commentary emailed to Chain Store Age. "Target’s topline could remain somewhat more choppy than general merchandise peers in the near term given an outsized exposure to discretionary categories, but Fitch expects the company’s efforts to intensify customer loyalty should allow it to maintain or even gain share in the years ahead."
Looking ahead, for the third quarter of fiscal 2024, Target expects a 0 to 2% increase in its comparable sales, and GAAP and adjusted EPS of $2.10 to $2.40.
Target is also maintaining its full-year guidance range of a 0 to 2% increase in its comparable sales, but now believes the increase will more likely be in the lower half of that range. However, based on strong profit performance in the first half of the year, the company now expects full-year GAAP and adjusted EPS of $9.00 to $9.70, up from the prior estimate of $8.60 to $9.60.
"Importantly, our growth was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services," said Brian Cornell, chair and CEO of Target Corporation. "We also saw improving trends across our discretionary categories, most notably in apparel, and we're seeing continued strength in beauty."
Minneapolis-based Target Corp. operates nearly 2,000 stores and the Target.com website.
