Target Posts Higher Comparable Sales
May 22 2019 - 9:52AM
Dow Jones News
By Khadeeja Safda and Allison Prang
Target Corp. said sales and profit rose at the start of the
year, as improvements to its stores, products and digital
capabilities continued to attract more shoppers in the first
quarter.
The company said Wednesday that comparable sales rose 4.8% in
the quarter ended May 4. Chief Executive Brian Cornell said Target
is growing sales and traffic more quickly than the broader market,
resulting in share gains. Digital sales rose 42% from a year ago,
accounting for nearly half of the overall comparable-sales
growth.
Mr. Cornell attributed the results to a strong economy and
Target's efforts to improve its supply chain, new brands it has
created and remodeling of its stores. "We're continuing to see the
bifurcation of winners and losers in retail," he said on a media
call Wednesday.
The gross-margin rate declined slightly, which Target attributed
to higher supply-chain and digital-fulfillment expenses. Target has
been rolling out web delivery and pickup services from many of its
stores.
Shares of Target, which are up 8.9% since the start of the year,
rose 8.6% to $78.18 early Wednesday as the sales growth was higher
than Wall Street analysts were expecting.
Results from retailers have been mixed so far this year, with
Walmart Inc. posting stronger-than-expected sales in the recent
quarter and chains including Kohl's Corp. and J.C. Penney Co.
clouding the outlook. Many retailers are also bracing for an
increase in tariffs on goods imported from China.
Target has expressed concerns over tariffs because it is among
several big-box chains that import a significant portion of
products from China. Mr. Cornell reassured investors Wednesday
about the company's ability to manage the higher costs.
"When there are external impacts to one business area or
category, we're able to balance the impact across our business in
ways not available to a single-category retailer," he said.
Earlier this month, the Trump administration imposed a 25%
tariff on $200 billion in Chinese goods, up from a 10% duty put in
place in October. The U.S-China trade fight has left American
shoppers largely unscathed, as major consumer categories, including
apparel and toys, have eluded tariffs so far.
Like other bricks-and-mortar retailers, Target has been spending
heavily to adjust to changes in shopping habits. It faces
competition from both Amazon.com Inc. online, as well as the
country's largest retailer, Walmart, which recently added to over
four years of sales increases.
Mr. Cornell has navigated a turnaround at Target by making
investments. Comparable sales at the company have increased for the
past two years.
Target has also been benefiting from store closures by Toys "R"
Us and other retailers.
Some analysts have expressed concerns over Target's spending,
suggesting that the retailer could experience more gross-margin
pressure in the long term. In a research note this week, Morgan
Stanley said Target's store-based supply chain "could limit margin
improvement and beget another round of investment in the
future."
Target, which has long sought to distinguish itself from Walmart
with fashion, said it launched new brands for intimates, sleepwear
and household essentials and plans to add another label for beach
and pool products. Last weekend, it attracted crowds to many stores
with a limited collection of apparel and home accessories from
preppy brand Vineyard Vines.
"The Vineyard Vines launch is already one of the most successful
in our history," said Mark Tritton, the company's chief
merchandising officer.
Target's quarterly profit rose 11% to $795 million, or $1.53 a
share, compared with $718 million, or $1.33 a share, for the same
quarter a year ago. Total sales climbed 5.1% to $17.4 billion.
Target said it expects a low-to-mid-single-digit increase in
comparable sales in the second quarter. It reaffirmed its
comparable-sales expectations and forecast for earnings for the
fiscal year.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
May 22, 2019 10:37 ET (14:37 GMT)
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