Unexpected eCommerce Boost Pushes Earnings Beat For Target

Target notched an impressive beat when it reported its Q2 earnings earlier this morning (May 22), with earnings and sales both clearing analyst predictions.

Net income clocked in at $795 million, or $1.53 per share. That is a beat on results at this time last year, when Target reported earnings of $718 million, or $1.33 a share, a year ago, well ahead of analyst estimates of an EPS of $1.43. Revenues came in at $17.63 billion, a 5 percent increase from 2017’s Q1 result, and ahead of estimates for $17.52 billion. Same-store sales were up 4.8 percent, up from a year ago and ahead of 4.2 percent estimates. Target also reported that traffic at stores was up 4.3 percent, transactions overall were up 4.3 percent and the average transaction amount was up 0.5 percent.

Online sales, however, were the start of the earnings show with a 42 percent surge, driven by the introduction of curbside grocery pickup at Target locations. Online sales now represent 7.1 percent of the retailer’s total sales, up from 5.2 percent a year ago.

“We continue to see a healthy economic backdrop for our business,” CEO Brian Cornell said, noting that Target is “well-positioned to deliver strong financial performance in 2019 and beyond.”

Big Q1 rollouts for Target included intimates and sleepwear brands Auden, Stars Above and Colsie, all of which were well-received. The retailer also launched an environmentally friendly brand of cleaning products called Everspring during the first three months of the year.

“When we incorporate our merchandising efforts into all the other initiatives that are driving our business … something really special happens for our guests,” CMO Mark Tritton told analysts. “Target becomes more relevant to them and they choose to shop us more often.”

Over the last year and a half, Target has developed a reputation as retail’s most avid survivor, according to an analyst note from Morgan Stanley earlier this month.

“Now, there are signs Target’s shipping-related deleverage is narrowing, particularly as it invests in fulfillment options … which promote higher traffic and reduce costs,” Morgan Stanley said ahead of earnings.

Target has also skillfully managed to generate buzz – and regain some of that late 90s, early 2000s “Tar-jay” feeling – with the launch this month of its limited-edition line of Vineyard Vines’ preppy apparel and accessories. The move generated long lines, sellouts and countless internet and social media mentions. On Tuesday (May 22), Target said the Vineyard Vines launch is already “one of the most successful” brand collaborations it’s ever done.

Target shares are up about 8.8 percent for the year, and the good earnings news drove that upward trajectory. The retailer’s shares were up 7 percent when market trading began.