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Retailer says it is taking market share; CEO sees 'bifurcation of winners and losers'
By Sarah Nassauer
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 21, 2019).
Target Corp. posted another quarter of rising sales, saying it continues to draw more shoppers and capture spending both in its stores and online.
Sales in stores and digital channels operating for at least 12 months rose 4.5% in the quarter ended Nov. 2, marking over two years of consecutive quarterly sales growth. E-commerce sales rose 31% in the period, with most of that growth coming from same-day delivery or pickup, the company said.
Consumers continue to feel like spending, Target Chief Executive Brian Cornell said in an interview. "We are starting to see the bifurcation of winners and losers" in retail, he said.
Retailers reporting quarterly sales thus far provide conflicting views on the health of the American consumer heading into the pivotal holiday season. Department-store chains Kohl's Corp. and J.C. Penney Co. have reported weak sales, but Amazon.com Inc., Walmart Inc. and TJX Cos. have logged strong gains.
Target's third-quarter results were better than Wall Street's forecasts and the chain raised its profit forecast for the fiscal year. Shares jumped more than 14% on Wednesday.
Home improvement chain Lowe's Co. reported weaker-than-expected quarterly sales on Wednesday but raised its adjusted full-year profit forecast and said it would close some Canadian stores. Its shares rose 3.9%.
Target, which has around 1,800 stores, is gaining market share in the apparel, home and beauty categories, Mr. Cornell said. Those categories have been helped by new in-house brands, store remodels and changes to how Target staffs those areas to offer better customer service, he said.
Consumer spending has been relatively robust this year, boosted by the strong U.S. economy, rising wages and low unemployment. The National Retail Federation said it expects holiday sales to rise in the range of 3.8% to 4.2% -- to about $730 billion.
Target on Wednesday raised its adjusted earnings-per-share targets for the year to $6.25 to $6.45, compared with the prior range of $5.90 to $6.20.
The Minneapolis, Minn.-based company expects stronger profits as it sells higher-margin store-brand products and expands in categories such as beauty that also tend to be higher margin, said Mr. Cornell.
In addition, he said, the profitability of its e-commerce sales has improved as Target has shifted its fulfillment system away from distribution centers to one based on compiling orders from nearby stores.
Target's total revenue rose 4.7% in the quarter to $18.7 billion, up from $17.8 billion during the same period last year. Net income from continuing operations rose 14.5% to $706 million during the quarter, up from $616 million during the same period last year.
Adding more online pickup and delivery options, while keeping customer service levels high, is costly, said executives on a conference call with analysts Wednesday.
Target has doubled the number of store workers dedicated to online fulfillment and same-day services in stores and added 500,000 more labor hours in training store workers versus last year, Mr. Cornell said on the call with analysts. Target will spend $50 million more this holiday season on payroll, he said.
Write to Sarah Nassauer at email@example.com
(END) Dow Jones Newswires
November 21, 2019 02:47 ET (07:47 GMT)
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