Target Q1 tops estimates with strongest sales gains in four years
Target Corp. came out of the gate swinging in its first quarter, with better-than-expected sales in all six of its core merchandising categories as its turnaround efforts to attract shoppers under new CEO Michael Fiddelke gain momentum.
The discounter reported that its total comparable sales rose 5.6%, the chain’s biggest quarterly increase since early 2022. Customer traffic rose 4.4% compared to the year-ago quarter.
“We’re encouraged that this top-line growth was broad-based, with growth across both stores and digital channels led by traffic, net sales increases in all six of our core merchandise categories, broad-based strength across guest demographics and cohorts, and momentum around both key seasonal events and everyday moments," Fiddelke said on the company’s earnings call. “Despite this early progress, we know our work is just beginning.”
Target reported first-quarter net income of $781 million for the quarter ended May 1, down from $1.04 billion in the year-ago period. Adjusted earnings per share were $1.71, far ahead of analysts estimates of $1.46 per share.
Net sales rose 6.7% to $25.44 billion, topping analysts estimates of $24.64 billion. The average transaction amount gained 1.1%.
Store comparable sales rose 4.7%. Digital comp sales grew 8.9%, led by more than 27% growth in same-day delivery.
The retailer's non-merchandise sales rose nearly 25%, reflecting strong growth in Roundel ad revenue, membership revenue Target Circle 360 and the Target+ marketplace.
Target said its first-quarter capital expenditures totaled $1.0 billion — 31% higher than last year — driven primarily by increased investments in new stores and store remodels. It opened seven new stores during the quarter, with more than 100 remodel projects currently in progress.
[READ MORE: Target in biggest store remodel program in a decade — here are the details]
"First quarter financial results were stronger than expected, providing encouraging early signs that our clarified strategy is resonating with our guests and driving broad-based growth across our business," Fiddelke said in the earnings statement. "While we're pleased with our Q1 performance, our focus remains on building consistent, long-term growth, and we recognize there is much more work in front of us. As we look ahead, we're focused on staying disciplined and flexible in an uncertain operating environment and continuing to invest boldly in our team, capabilities, and an elevated guest experience to unlock our full potential over time."
Looking ahead, Target noted it is about to start its largest food and beverage transition in more than a decade, which will accelerate newness in the category by 50%. It also is undertaking multi-year home reinvention, beginning with an overhaul of nearly 75% of decorative accessories, and will roll out its new Target Beauty Studio program in the fall.
The company released its results the day after it named former Walmart executive Jeff England as executive VP, chief global supply chain and logistics officer.
Target raised its full-year revenue outlook, saying it expected the momentum to continue the rest of the year. For the full year, it now expects net sales growth to increase 4%, up from its previous forecast of 2%. It expects earnings per share to be the near the high end of the $7.50 to $8.50 guidance it previously gave.
