target The company on Wednesday reported quarterly profits boosted by tariff rebates and raised its full-year outlook as the retailer showed signs of a recovery taking hold.
According to the company, net sales increased 5.3% from the previous year. Comparable sales rose 3.8%, beating Wall Street expectations of 2.4%, according to Street Accounts. Target added in the release that it sees “broad-based” strength across categories.
“We are encouraged by the progress we have made and have a clear view of the important work ahead,” CEO Michael Fidelke said in a call with reporters. “The second quarter is an important step forward in the plan we set out earlier this year to open a new chapter of growth for Target. What we saw from our company this quarter reflects the level of change we knew was necessary to execute on our strategy.”
Target’s second-quarter results also included a $752 million ($1.65 per share) boost to net income from tariff refunds. The company said its second quarter gross profit and operating profit included a pretax gain of $994 million from that repayment.
Target raised its full-year outlook, citing both strong sales trends and a temporary boost in revenue. The company raised its full-year net sales growth forecast by 1 percentage point to about 5%.
The company expects full-year EPS, including duty refunds, to be between $9.90 and $10.90. Excluding repayments, the range is $8.25 to $9.25 per share, compared with the previous outlook of $7.50 to $8.50 per share.
Although Target has reported encouraging results for two consecutive quarters, Fidelke said he remains cautious about the company’s turnaround.
“Let me be clear: we still have a lot of work to do,” he told reporters. “The combination of stronger execution and improved guest feedback provides a solid foundation on which to build as we continue to advance our strategy.”
Target stock rose 4% on Wednesday.
Below is a comparison of the retailer’s second-quarter financial report to Wall Street expectations, based on a survey of analysts by LSEG.
Earnings per share: $2.46 adjusted vs. $2.33 expected Revenue: $26.54 billion vs. $26.14 billion expected
For the three months ended Aug. 1, Target reported net income of $1.88 billion, or $4.11 per share, compared with $935 million, or $2.05 per share, in the year-ago period. This comparison also includes the benefit Target received from collecting customs duty refunds.
“The goal is not to have two strong quarters,” Fidelke told reporters. “What we are looking for is long-term, sustained, sustainable sales and bottom-line growth.”
The company said digital comparison sales increased 8.7% in the quarter, and same-day delivery services grew more than 25%.
Target said it saw growth in all six major categories and strength across its food and beauty businesses. But the apparel and home goods categories have lagged behind other sectors, and company executives said they were keen to correct the discrepancy.
“We knew the Homelike category would be a multi-year journey, and we were encouraged by the response from our guests to the changes we made in the Homelike category,” Fidelke told reporters. “We changed 75% of our decorative accessories assortment and saw strong (comparable sales) with those changes. Frankly, we need more of this type of improvement in these two categories.”
Target also said it has lowered prices on more than 10,000 items, including further reductions in its pipeline, to lure customers back to its stores. The company opened 17 new stores in the second quarter.
The company has been trying to prove to investors that it’s on the right path to returning to consistent growth and re-attracting core customers. The benefits come as many consumers continue to reduce their spending, weighed down by macroeconomic conditions.
Target reported positive same-store sales last quarter for the first time in five quarters, increasing 5.6%.
Target stock is up more than 55% this year.
