Increased Traffic at Target Generates Strong Q2 Results
After some tough periods in its recent history, Target Corp. beat expectations during the second quarter. The retailer reported a 2% gain in sales comps, which came in at the high end of its expectations, and a 3% bump in traffic compared to the previous year. Profits also improved, as adjusted earnings per share (EPS) hit $2.57 versus $1.80 in the same period last year.
It was a rosy period for online sales, too, up 8.7% on a year-over-year (YoY) basis. Target’s focus on e-commerce, through its Target Circle loyalty program and expanded drive-up options, spurred double-digital growth in same-day services.
The retailer is also making strides in its efforts to combat shrink, an issue that plagued the company over the past two years. “As we stepped into the year, our aim was to have shrink plateau, and so to improve from the deterioration we've seen over the last couple of years, two quarters in — we're achieving that and then some,” said Michael Fiddelke, CFO and COO, during the Aug. 21 earnings webcast.
While the overall performance exceeded some analysts’ projections, Target leaders say that Q2 results were, no pun intended, on target. "We made a commitment to get back to growth in the second quarter, and the team delivered, all while expanding operating margins and growing EPS by more than 40% compared to last year," remarked Chair and CEO Brian Cornell, adding, “Importantly, our growth was driven entirely by traffic in stores and our digital channels.”
The company pointed to positive sales trends across several key areas and categories. Food and beverage, for example, drove traffic, sales and enthusiasm around new products in the candy segment and strong brands like Bubly sparkling water. Apparel also returned to growth, while the beauty category experienced growth in the high single digits and was buoyed by a host of product launches.
Target’s emphasis and action on value also lifted stores’ outcomes in the second quarter. According to the mass merchant, the move to lower prices on 5,000 frequently-purchased items led to higher traffic and unit volume and the midsummer sales event, Target Circle Week, resulted in high engagement across all categories. More than two million new Target Circle members signed up in the second quarter.
Leaders struck a pragmatic tone for the future. “Looking ahead, even as we maintain the measured outlook that has served us well, we are focused on building on this positive momentum by executing our strategy and providing the unique combination of newness and value that consumers can only find at Target,” said Cornell.
For the third quarter, Target foresees a 0 to 0.2% increase in comp sales and an adjusted EPS between $2.10 and $2.40. For the full-year, the retailer expects sales comps to come in on the lower half of the 0 to 2% estimate. “However, based on strong profit performance in the front half of the year, the company now expects full-year GAAP and adjusted EPS of $9.00 to $9.70, up from the prior range of $8.60 to $9.60,” the company’s financial report noted.
Target reported that it is on track to invest $3 billion to $4 billion in its business this year and opened 10 new stores and three new supply chain facilities so far in 2024. More than 50 remodels are in the works.
Minneapolis-based Target Corp. is No. 7 on The PG 100, Progressive Grocer’s 2024 list of the top food and consumables retailers in North America, with nearly 2,000 locations. PG also included the company on its Retailers of the Century list.
