Targets Posts Higher Comparable Sales
May 22 2019 - 07:42AM
Dow Jones News
By Khadeeja Safda and Allison Prang
Target Corp. posted an increase in comparable sales that was
more than expected and reaffirmed that guidance for the fiscal
year, sending shares higher in premarket trading.
The company said Wednesday that comparable sales rose 4.8% in
the quarter ended May 4.
Chief Executive Brian Cornell said in prepared remarks that the
sales increase was driven by more traffic in stores and
market-share gains.
The company's gross-margin rate declined slightly. Target said
the drop was because of higher supply-chain and digital-fulfillment
expenses.
Shares of Target, which are up 8.9% since the start of the year,
rose 8% premarket as Wall Street analysts were expecting comparable
sales to be lower.
Results from retailers have been mixed so far this year, with
Macy's Inc. posting stronger-than-expected sales in the recent
quarter and other chains like 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 is among
several big-box chains that source a significant portion of
products from China.
Like other brick-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 Inc., which reported strong
sales in the latest quarter.
Mr. Cornell has navigated a turnaround Target by adding private
brands, renovating hundreds of locations and using its chain's
stores to fulfill online orders. Comparable sales at the company
have increased for the past two fiscal years, after declining in
fiscal 2017. Target has also been benefiting from store closures at
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'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.
Analysts polled by FactSet expecting earnings of $1.44 a
share.
Comparable digital channel sales grew 42% in the quarter.
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 expectations for earnings from
continuing operations and adjusted earnings for the fiscal
year.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
May 22, 2019 07:27 ET (11:27 GMT)
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