Categories Consumer, Earnings

Target Q1 profit jumps 11%, beats estimates

Target Corporation (TGT) reported an 11% jump in earnings for the first quarter of 2019 helped by strong traffic and comparable sales growth. The results exceeded analysts’ expectations. The company guided second-quarter earnings above the consensus estimates.

Net income from continuing operations climbed 10.5% to $792 million and earnings jumped by 15.1% to $1.54 per share. Adjusted earnings advanced 15.9% to $1.53 per share. The company has made important investments to build a durable operating and financial model that drives consumer relevance and sustainable growth.

Total revenues increased 5% to $17.6 billion, reflecting sales growth of 5.1% combined with a 0.5% rise in other revenue. Comparable sales grew by 4.8% on traffic growth of 4.3%.

Target (TGT) first quarter 2019 earnings snapshot

Comparable digital channel sales soared 42%, on top of 28% last year. Comparable digital sales contributed 2.1 percentage points to Target’s overall comparable sales growth. Same-day fulfillment services drove well over half of the company’s digital sales growth.

Looking ahead into the second quarter of 2019, the company expects comparable sales growth in the low-to-mid-single-digit range and operating income growth in the range of mid-single digit. Target predicts both GAAP EPS from continuing operations and adjusted EPS of $1.52 to $1.72.

For fiscal 2019, the company still expects a low-to-mid-single-digit increase in comparable sales and a mid-single-digit increase in operating income. The company still anticipates both GAAP EPS from continuing operations and adjusted EPS of $5.75 to $6.05.

For the first quarter, the gross margin rate declined to 29.6% from 29.8% a year ago, reflecting higher digital fulfillment and supply chain costs, partially offset by the benefit of merchandising strategies. SG&A expense rate was 20.8%, down from 21.1% in the prior-year quarter. This performance reflected cost savings in technology and a timing benefit in marketing expenses, combined with strong expense control which offset continued pressure from wage growth.

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The company returned $608 million to shareholders in the first quarter of 2019, including dividends of $330 million and share repurchases totaling $277 million. At the end of the first quarter, the company had about $1 billion of remaining capacity under its current $5 billion share repurchase program.

Target completed 53 remodels across the country in the first quarter and is on track to deliver about 300 remodels this year. Guests continue to respond by shopping remodeled stores more often, driving incremental traffic and sales. The company opened 7 small-format stores in important growth markets.

Overall, the company’s strategy of using stores to fulfill digital orders accounts for 80% of its digital volume while driving down costs and growing its most profitable digital sales. The total number of stores for the first quarter was 1,851, up from 1,829 in the previous year quarter.

Shares of Target ended Tuesday’s regular session down 0.17% at $71.96 on the NYSE. Following the earnings release, the stock inched up over 8% in the premarket session.

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