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1 Year : From Feb 2019 to Feb 2020
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 email@example.com
(END) Dow Jones Newswires
May 22, 2019 07:27 ET (11:27 GMT)
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