Target boosts Q2 guidance as traffic, sales improve

Dive Brief:

Shares of Target rose on Thursday after the retailer updated its guidance for its second quarter same-store sales and earnings per share, thanks to improved traffic and sales trends through the first two months of the quarter, according to a company press release.
Target now expects to report a modest increase in its second quarter same-store sales, as well as Q2 GAAP and adjusted earnings above the high end of its previous guidance range of 95 cents to $1.15 per share.
Both GAAP and adjusted EPS are expected to reflect a 5–9-cent benefit driven by the net tax effect of Target's global sourcing operations, and GAAP EPS is expected to reflect 2–3 cents of pressure related to the unfavorable resolution of tax matters, the company also said. Target plans to report its second quarter financial results on Aug. 16.

Dive Insight:

In his statement Thursday, CEO Brian Cornell said broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment, led to the company’s elevated guidance.

“Our team is energized and focused on enhancing and modernizing the Target shopping experience, and our guests are responding,” he said, noting that the retailer’s May Cloud Island baby merchandise launch was a success, and that four more exclusive brands in home and apparel are on deck. The retailer has plans to launch 12 new brands over the next 18 months in an effort to cement its "Tar-zhay" image.

“As we do research, we recognize we have an opportunity to explore different aesthetics in different ways," Joshua Thomas, director of public relations at Target, recently told Retail Dive. "It’s not a swap for this brand for that, it’s looking at our portfolio and recognizing what those brands have done for us and seeing an opportunity to do something different and something only Target can do.”

In addition to store and merchandise improvements, the retailer is also working on its e-commerce. All told this year, Target is dedicating about $1 billion of operating profits to improve brick-and-mortar and digital operations. Cornell on Thursday said the company’s Restock pilot, providing next-day delivery of a shopping-cart-sized shipment from an assortment of more than 10,000 essential items and seen as an answer to Amazon's Prime Pantry and Dash program, is showing early success. Also this week, the company announced it began testing a new curbside pickup service with employees at three Minneapolis-area stores this month, which it hopes to open to customers in the coming months.