Digital Sales Aid Target’s Better-Than Expected Q1 Comps

Helped by digital sales that continued to soar in its first quarter of fiscal 2019, Target Corp. has reported better-than-expected comparable-sales growth of 4.8 percent on a 4.3 percent increase in comparable traffic.

Indeed, the retailer’s Q1 comparable digital-channel sales rose an impressive 42 percent, on top of 28 percent last year, with these sales contributing 2.1 percentage points to its overall comps growth. According to the company, same-day fulfillment services – order pickup, drive-up and Shipt – spurred considerably more than half of its digital sales growth.

The company also revealed GAAP earnings per share (EPS) from continuing operations of $1.53 in Q1 2019, up 15.1 percent from $1.33 in the year-ago period, while Q1 2019 adjusted EPS were $1.53, a 15.9 percent increase from $1.32 in Q1 2018.

“Target had an outstanding first quarter, as our team delivered a great experience for our guests and drove strong growth in traffic, comparable sales, operating income and earnings per share,” noted Brian Cornell, the company’s chairman and CEO. “Over the last two years, we have made important investments to build a durable operating and financial model that drives consumer relevance and sustainable growth. Target’s first-quarter performance and market-share gains demonstrate that the model is working. Throughout this year, we will continue to extend the reach of our same-day fulfillment options, strengthen our portfolio of owned and exclusive brands, remodel and open more stores and invest in our team. We’re confident that we’re well positioned to deliver strong financial performance in 2019 and beyond.”

The company’s total Q1 2019 revenue of $17.6 billion increased 5 percent from $16.8 billion last year, reflecting sales growth of 5.1 percent combined with a 0.5 percent uptick in other revenue. Its operating income came to $1,135 million in Q1 2019, up 9 percent from $1,041 million in the year-ago period. Target’s Q1 operating income margin rate was 6.4 percent in 2019, versus 6.2 percent in 2018, and Q1 2019 gross margin rate was 29.6 percent, compared with 29.8 percent last year, which the company attributed to higher digital fulfillment and supply chain costs, partly offset by beneficial merchandising strategies.

Target said that it expected second-quarter comps growth in the low- to mid-single digit range, mid-single-digit growth in operating income dollars and both GAAP EPS from continuing operations and adjusted EPS of $1.52 to $1.72, while for full-year 2019, the retailer still expected a low- to mid-single-digit rise in comps, a mid-single-digit increase in operating income, and both GAAP EPS from continuing operations and adjusted EPS of $5.75 to $6.05.

Minneapolis-based Target operates more than 1,800 stores and Target.com.