Wednesday was the best day for Target Corp. stock in three months. The discount store reported a triple beat for its fiscal second quarter and raised its full-year profit outlook, citing “meaningfully” better trends across discretionary categories.
The company also said that store traffic went up for the first time in over a year, which led to growth in comparable sales that ended a four-quarter drop.
It was only people visiting our stores and using our online methods that helped us grow. Our same-day delivery services saw double-digit growth, according to CEO Brian Cornell. “We also saw better trends across all of our discretionary categories, especially in clothing, and beauty is still doing very well.”
He also told analysts on the call after the end of the quarter that he was “pleased” to be back to buying back shares for the first time in two years.
The price of TGT 12.49% stock rose 13.9% in the morning, and it is now on track to finish at its highest level since May 10. It was also on track for its biggest one-day gain since November 15, 2023, when it jumped 17.8% after reporting better-than-expected earnings for the third quarter.
Its net income for the quarter ending August 3 went up from $835 million, or $1.80 a share, the same time last year to $1.19 billion, or $2.57 a share. That was more than the $2.18 earnings per share that FactSet thought would happen.
Total sales went up 2.7% to $25.45 billion, which was more than the $25.19 billion that FactSet predicted.
And comparable sales, which are sales at shops that have been open for at least 13 months, went up 2.0%, which was more than the 1.1% increase that FactSet predicted. The first rise in traffic since the first quarter of 2023—3.0%—was enough to make up for a 0.9% drop in the average transaction amount, which was caused by lower prices.
“Discretionary sales trends continued to improve meaningfully,” Target said. “Comparable apparel sales grew more than 3% in the quarter.”
After falling by 2% in the first quarter, clothing sales quickly turned around and went up.
Beauty was still a “standout,” with sales going up 9% in the second quarter. The food and drink and basics categories also saw more visitors.
A transcript of CEO Cornell’s call with investors after the company’s earnings show that he said that many customers are still putting off purchases “until the moment of need,” but that customers are still “remarkably resilient” and still shop around holidays and other seasonal events.
The company didn’t say when it thought discretionary sales trends would change from getting better to actually growing. However, there was some hope for current quarter comparable sales because Target was in the “heart of back-to-school season” and the “early chapters of back-to-college,” and the company was “excited” about Halloween.
Target also said that it bought back 1.1 million shares of its common stock for $155 million. In the fiscal second quarter of 2022, Target paid $2.64 billion to buy back 12.5 million shares. This was the last time the company bought back shares.
“We plan to continue to be able to repurchase” in the second half of 2024 and in the years to come, said Chief Financial Officer Michael Fiddelke.
The company thinks that third-quarter adjusted EPS will be between $2.10 and $2.40, which is less than the current FactSet average of $2.22. They also think that comparable sales will be flat to up 2%, which is more than the expected 1.5% growth.
The company raised its EPS forecast for the whole year from $8.60 to $9.60 to $9.00 to $9.70. It also said that comparable sales growth will be in the lower half of the range it had previously given, which was flat to up 2%.
So far this year, Target stock has gone up 14.5%, while Walmart Inc. stock has gone up 42.8% and the S&P 500 index SPX 0.25% has gone up 17.7%.
