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Target Displays Solid 6-Month Run-Up, Adds More Than 40%

Zacks Equity Research

Target Corporation TGT has emerged as an investor favorite courtesy of sound fundamentals and growth efforts that reinforce its position in the ultra-competitive retail landscape. We note that shares of this general merchandise retailer have advanced 42.3% in the past six months compared with the industry’s growth of 35.9%.

This Zacks Rank #2 (Buy) stock has also comfortably outperformed the Retail-Wholesale sector and the S&P 500 Index that advanced 26.4% and 24.3%, respectively, in the said time frame. Further, the stock is hovering close to its 52-week high of $90.39. There is a likelihood that Target with a long-term earnings growth rate of 7.1% can attain new highs. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Strategic Endeavors to Drive Momentum

Retail is no more restricted to brick-&-mortar and the scenario has drastically changed with the advancement of technology and digital transformation, which have altered consumer shopping. In fact, Target has taken steps that have improved prospects in a big way. The company’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores to generate higher sales productivity bode well.

Robust traffic, favorable store comps and surge in comparable digital sales are clearly aiding results. Comparable sales rose 4.8% in the first quarter of fiscal 2019. Comparable digital channel sales surged 42% and added 2.1 percentage points to comparable sales. Management envisions both second quarter and fiscal 2019 comparable sales to increase in low-to-mid-single digit range.

Target envisions second-quarter adjusted earnings between $1.52 and $1.72 per share, higher than $1.47 reported in the year-ago period. For fiscal 2019, management continues to anticipate adjusted earnings in the band of $5.75-$6.05 per share, up from $5.39 reported in fiscal 2018.

Taking Strides in Delivery Business

The company has rolled out Target Restock program that enable customers to restock their shipping box with essential items online and get them delivered at their doorstep by the next business day for a nominal charge. Further, in order to improve supply chain and expand delivery capabilities, the company acquired Grand Junction.

Earlier, Target had teamed up with popular online grocery delivery service, Instacart, to capture the booming online grocery delivery market. Further, the company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service, Shipt, to provide same-day delivery of groceries, essentials, home, electronics, toys and other products.

Shipt operates in more than 1,500 outlets in more than 200 markets. Per media reports, online shoppers can now get items delivered on the same day by paying a fee of $9.99 per order.

Wrapping Up

Target is deploying resources to enhance omni-channel capabilities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options to take on Amazon AMZN, Walmart WMT and Kroger KR. The company has undertaken rationalization of supply chain with same-day delivery of in-store purchases along with technology and process improvements.

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