Target ran strong in its first quarter and the discounter is equally confident about the rest of the year.
Target’s investments in its physical stores and online capabilities are clearly bearing fruit. On Wednesday, the company reported earnings and sales that topped analysts’ estimates and, even with the looming threat of increased tariffs, maintained its outlook for the full year.
“Target’s first quarter performance and market-share gains demonstrate that the model is working,” said chairman and CEO Brian Cornell. “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.”
Target’s net income rose to $795 million, or $1.53 per share, compared with $718 million, or $1.33 a share, in the year-ago period. Analysts had predicted earnings of $1.43 per share.
Total revenue rose 5% to $17.6 billion, beating analysts’ expectations from $16.8 billion last year. Same-store sales increased 4.8 % on traffic growth of 4.3%.
Comparable digital sales surged 42%, contributing 2.1 percentage points to comparable sales growth. Same-day fulfillment services (order pick up, drive up and Shipt) drove well over half of the company’s digital sales growth.
During the quarter, Target completed 53 of the approximate 300 store remodels it is scheduled to complete this year. It also opened seven small-format stores, including its first location in Santa Barbara, Calif.
“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,” Cornell said.
Target continues to generate buzz by launching private brands. It launched three new intimates and sleepwear brands (Auden, Stars Above and Colsie) during the quarter which have been well received, company executives said on a call with analysts.
In comments, Neil Saunders, managing director of GlobalData Retail, noted that Target’s first-quarter results “stand in direct contrast to those recently coming from the beleaguered department store sector and demonstrate that success is there for the taking, so long as retailers are prepared to work for it.”
He also praised the chain’s investments in its stores.
“One of the success stories at Target has been the revitalization of physical stores, many of which have been refurbished and are providing a much more pleasant and engaging shopping experience,” Saunders said. “This, along with improvements to the ranges put into stores – particularly in apparel and beauty, have made them more compelling destinations leading to an increase in shopper traffic.” For more commentary, click here.