Retail

Target Shares Surge On Big Earnings Beat

Target

The team at Target is having a very good morning, after the retailer logged massive growth in store-based foot traffic, as well as a solid beat on earnings, revenue and same-store sales. Also, eCommerce was a big factor in Target’s Q2 earnings success, with growth clocking in at 40 percent.

“We are seeing a great consumer response … unprecedented traffic. As we go back and look, we’ve never seen traffic like this,” CEO Brian Cornell told CNBC‘s Becky Quick on Wednesday.

The Street was similarly happy with the result, with shares up 5.5 percent in premarket trading.

Target announced about a year ago its intentions to invest $7 billion in building its eCommerce platform, adding to its line-up of store brands, designing and opening smaller footprint stores and remodeling the locations already in operation. According to Cornell, those investments are paying off, demonstrated by last quarter’s strongest same-store sales growth in 13 years.

“I’ve been doing this for a long time, and I think this is the healthiest environment I’ve ever seen,” Cornell said on “Squawk Box,” referring to consumer spending.

All in, revenue climbed nearly 7 percent to $17.8 billion from $16.83 billion this time last year, ahead of the projected $17.28 billion in sales investors were expecting. Home goods apparel and electronics were the strongest categories during the quarter. Comparable store sales shot up 6.5 percent – a bigger bump that the substantial 4 percent bump the analysts were forecasting, and the best result Target has seen in this segment in over a decade. Online sales increased 40 percent, a boost the retailer attributes to its massive one-day sale in July, held in tandem with Amazon Prime Day.

“As we look ahead to 2019, we expect to achieve scale across the full slate of our initiatives — creating efficiencies and cost savings, further strengthening our guest experience and positioning Target to continue gaining market share,” Cornell added. “We are investing in categories like toy and baby, where we know we have this big opportunity ahead of us. We are going to make sure we are taking more than our fair share of that market.”

Target does confront some headwinds going into the backend of the year, including higher transportation costs pushed by rising fuel prices and a shortage of truck drivers in the U.S. There are also concerns about the looming tariffs and what kind of gravity they will exert on retail sales for the rest of the year.

But as Cornell told CNBC, the tariffs are “still very manageable.”

Target has “a lot of levers to pull to make sure we are still price competitive,” he pointed out. “We’ve got alternatives, flexibility and agility in our system.”

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