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Target Rockets Past $100 Per Share on Strong 2nd-Quarter Earnings Performance

Shares of Target Corp. (NYSE:TGT), a major large-format retailer, set a new intraday high on Wednesday as the company released second-quarter earnings that surpassed both top-line and bottom-line consensus estimates.

For the quarter ending Aug. 3, the Minneapolis-based retailer reported net income of $938 million, or earnings of $1.82 per diluted share, compared with net income of $799 million, or $1.49 per share. Net earnings exceeded the Refinitiv estimate by 20 cents per share.

Company accelerates same-store sales through digital innovation and designer partners

During the earnings call, Target CEO Brian Cornell and Chief Operating Officer John Mulligan explained several initiatives to drive sales growth since 2017, including digital innovation and designer partners like jeans manufacturer Levi Strauss & Co. (NYSE:LEVI). Cornell said comparable sales increased 3.4% during the quarter, outperforming the Refinitiv estimate of 2.9%, and approximately 10% over the past two years.


Mulligan underscored the company's efforts to "apply a guest-first mentality while benefitting the business." Target's same-day offerings, which include Order Pickup, Drive Up and Shipt, represented approximately 75% of the 34% increase in comparable digital sales.

Cornell and Chief Merchandising Officer Mark Tritton announced that Target is planning to bring back over 300 products from 20 of its designer partners to celebrate the company's 20th anniversary of its first designer partnership. Tritton said the prices will range between $7 and $160 and that the anniversary sale is expected to begin on Sept. 14.

Shares reach new intraday high on increased earnings guidance despite trade war uncertainty

Shares of Target reached an intraday high of $102.05, a new all-time intraday high and a 19.29% increase from Tuesday's close of $85.55. The Dow Jones Industrial Average and the Standard & Poor's 500 Index increased approximately 0.80% from the prior close, led by strong earnings from Target and major Bill Ackman (Trades, Portfolio) holding Lowe's Corp. (NYSE:LOW).


Cornell mentioned the timing and extent of additional China tariffs on consumer products like apparel, beverages and footwear can "add a level of uncertainty" to the company's earnings performance for the remainder of the year. Despite this, Cornell and Chief Financial Officer Cathy Smith said comp sales for the third and fourth quarters are expected to match the 3.4% comp sales growth delivered in the second quarter. Additionally, based on management's expectations and outlook, Target expects to deliver full-year earnings between $5.90 and $6.20, up 15 cents from the prior guidance range of $5.75 to $6.05. Smith said the midpoint of the guidance range represents approximately a 10% increase from the prior year's earnings.

Gurus cheering on Target's strong earnings include Jim Simons (Trades, Portfolio)' Renaissance Technologies, Jeremy Grantham (Trades, Portfolio) and Ken Heebner (Trades, Portfolio)'s Capital Growth Management. Heebner's firm established a holding of 415,000 shares during the second quarter, dedicating 2.13% of its equity portfolio to the position.


Disclosure: No positions.

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This article first appeared on GuruFocus.