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Target reported another monster quarter and its stock is rising

Brian Sozzi · Executive Editor
Updated

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By all indications, it will be a merry holiday season for discount retailer Target (TGT).

For the second straight quarter, Target blew away conventional thinking on Wall Street. The company crushed analyst projections on sales, earnings, same-store sales and gross profit margins. Online sales surged 31%. Target also once again meaningfully jacked up its full-year earnings guidance.

Target shares spiked 8% in the pre-market, indicating the stock will open at a record high.

Here’s how Target’s third quarter stacked up against Wall Street estimates and its outlook shared 90 days ago:

  • Total sales: $18.7 billion vs. $18.22 billion estimate

  • Earnings per share: $1.36 vs. $1.19 estimate (Target guidance: $1.04 to $1.24 a share)

  • Same-store sales: 4.5% increase vs. 3.5% estimated increase (Target guidance: up 3.4%)

  • Gross profit margin: 29.8% vs. 29% estimate

  • Full-year earnings guidance: $6.25 to $6.45 vs. estimate $6.18 a share (Target prior guidance: $5.90 to $6.20 a share)

FILE - In this July 10, 2019, file photo shoppers visit the downtown Target Store in Minneapolis. On Tuesday, July 30, the government reports on the pace of consumer spending in June. (AP Photo/Jim Mone, File)
FILE - In this July 10, 2019, file photo shoppers visit the downtown Target Store in Minneapolis. On Tuesday, July 30, the government reports on the pace of consumer spending in June. (AP Photo/Jim Mone, File)

Now you know why the quarter from Kohl’s on Tuesday stunk up the joint. And possibly, why Macy’s will report another lackluster quarter later this week just days removed from another clunker of a quarter from J.C. Penney. Target is gaining market share in retail, plain and simple. The company’s stores are in inviting new formats. CEO Brian Cornell confirmed on a call with analysts that remodeled stores continue to provide a sales lift. There’s a host of new apparel and food brands to shop for. On apparel alone, same-store sales popped 10% in the quarter. Food same-store sales rose by a low-single digit percentage.

And same-day delivery services are boosting those inclined to shop online.

When a retailer could put all these new initiatives together — which culminate in profitable market share gains — in a healthy consumer environment no less, you get another strong quarter like the one Target just shared today. Sometimes it’s that simple.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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