Target said Wednesday its profit jumped 17% during the second quarter as its in-store pickup and same-day shipping services drew more customers, and it raised its outlook for the rest of the year.
Sales at the company’s stores that have been open for at least a year grew 3.4% during the quarter, also exceeding expectations. Target said same-day fulfillment services, including order pickup, drive up and Shipt same-day delivery business, contributed nearly 1.5 percentage points of its overall same-store sales growth.
Target’s shares surged 17% in premarket trading, on pace to open at a record high.
Here’s what Target reported for the fiscal second quarter ended Aug. 3 compared with what analysts were expecting, based on Refinitiv data:
- Earnings per share: $1.82 vs. $1.62 expected
- Revenue: $18.42 billion vs. $18.34 billion expected
- Same-store sales: up 3.4% vs. growth of 2.9% expected
Target and its rivals are searching for ways to make shopping more convenient. To compete with Amazon, they are improving their online stores and trying to ship faster. They are also betting that consumers do not mind visiting stores, especially when it’s faster than waiting for delivery.
“These options offer speed, convenience and reliability,” Target CEO Brian Cornell told analysts on a call Wednesday. “And as a result, they’re quickly becoming the fulfillment choices for our guests. And most importantly, because these options leverage our existing in-store infrastructure, technology and teams, same-day fulfillment delivers outstanding financial performance as well.”
Net income rose to $938 million, or $1.82 a share, compared with $799 million, or $1.49 per share, a year earlier. That was 20 cents better than expectations for earnings per share of $1.62, based on Refinitiv data.
Total revenue grew 3.6% to $18.42 billion from $17.78 billion a year earlier, topping estimates for $18.34 billion.
Sales at Target stores open for at least 12 months and from its website were up 3.4%, better than expectations for growth of 2.9%. A year earlier, same-store sales climbed 6.5%. Target said traffic was up 2.4% during the latest quarter. Digital sales surged 34%, down from a 42% increase during the first quarter.
“This is as good a quarter as Target possibly could have had,” Moody’s analyst Charles O’Shea told CNBC’s “Squawk Box.”
Like Walmart, Target is expected to have seen somewhat of a sales bump around Amazon’s 48-hour Prime Day event in early July.
Cornell said the company had “outstanding performance” during the first half of 2019, giving it the “confidence” to boost expectations. Target is now calling for adjusted earnings per share to fall within a range of $5.90 to $6.20, up from a prior range of $5.75 to $6.05.
“Traffic and sales continue to grow,” Cornell said.
Target’s report comes on the heels of its bigger rival Walmart, which last week reported earnings that topped expectations and raised its outlook for the year despite the ongoing threat of additional tariffs taking effect amid the U.S. trade war with China.
Analysts have largely expected Target to continue to see same-store sales gains, while other retailers like department store chains are struggling to draw traffic. Target also suffered a register outage during the latest quarter, but that wasn’t enough to weigh on sales revenue.
Target this week announced the launch of a new grocery line, Good & Gather, marking its biggest private-label venture to date. The retailer has been investing heavily in incubating its own brands. It’s also been investing in store remodeling, opening small-format locations in major metros like New York and rolling out curbside pickup for online orders.
Target shares are up more than 30% this year.