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Target Corporation (TGT - Free Report) registered a stellar performance in second-quarter fiscal 2020, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also grew year over year. While the quarter marked the sixth successive earnings beat, revenues surpassed the estimate for the second straight time. Notably, comparable sales increased for the 13th consecutive quarter. The metric gained from strength in the digital channel, given customers’ increased shift to online shopping amid coronavirus-led social distancing.
Shares of this Minneapolis, MN-based company are up more than 8% during the pre-market trading session on Aug 19. Further, Target’s shares have gained 14.4% in the past three months compared with the industry’s growth of 12.3%.
This operator of general merchandise stores reported adjusted earnings of $3.38 per share that surpassed the Zacks Consensus Estimate of $1.64, and rose sharply from $1.82 per share reported in the year-ago period. Impressively, solid operating performance helped offset unprecedented investments in team member pay & benefits amid the coronavirus crisis.
The company generated total revenues of $22,975 million that increased 24.7% from the year-ago period and outpaced the Zacks Consensus Estimate of $20,235.1 million. We note that sales jumped 24.8% to $22,696 million, while other revenues were up 16.6% to $279 million.
Target Corporation Price, Consensus and EPS Surprise
Markedly, Target witnessed sturdy market-share gains in all five core merchandise categories owing to strong demand. Consumers splurged on office items, video games, décor, domestics and kitchenware as they work, learn, dine and play at home. While electronics sales soared more than 70%, apparel sales rebounded from a 20% decline in the first quarter to double-digit growth in the second quarter. Home and beauty rose by more than 30% and 20%, respectively. Notably, both essentials and food & beverage were up by about 20%.
We note that stores fulfilled more than 90% of the company’s sales in the quarter. Same-day services (Order Pick Up, Drive Up and Shipt) surged 273% and accounted for roughly 6 percentage points of total comparable sales growth. Sales fulfilled by Shipt were up more than 350% year over year and sales through Drive-Up were up more than 700% during the quarter under review. In-store pick-up sales rose more than 60%.
Meanwhile, comparable sales for the quarter increased 24.3%, backed by a 18.8% jump in average basket as consumers consolidated trips amid the pandemic. The number of transactions rose 4.6%. Digital comparable sales soared 195% and added 13.4 percentage points to comparable sales. Comparable stores sales grew 10.9% during the quarter.
Gross margin expanded 30 basis points to 30.9% during the quarter on account of higher sales and lower discounts driven by high sell through rates. Operating margin grew 280 basis points to 10% primarily due to strong expense leverage on solid sales performance.
Target’s debit card penetration shrunk 70 basis points to 11.8%, while credit card penetration fell 200 basis points to 8.7%. Total REDcard penetration declined to 20.5% from the year-ago quarter’s 23.2%.
Other Financial Details
During the reported quarter, Target paid dividends of $330 million. On Mar 25, the company informed that it has suspended its share-buyback plan as part of the company’s efforts to preserve financial flexibility amid the crisis. The company had $4.5 billion remaining under its $5-billion share-buyback program approved last September.
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $7,284 million, long-term debt and other borrowings of $14,188 million and shareholders’ investment of $12,578 million.
Sprouts Farmers Market (SFM - Free Report) has a trailing four-quarter average earnings surprise of 49.9% and carries a Zacks Rank #2 (Buy).
Dollar General (DG - Free Report) has a long-term earnings growth rate of 12.5%. Currently, it carries a Zacks Rank #2.
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Target's (TGT) Q2 Earnings Surpass Estimates, Comps Rise
Target Corporation (TGT - Free Report) registered a stellar performance in second-quarter fiscal 2020, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also grew year over year. While the quarter marked the sixth successive earnings beat, revenues surpassed the estimate for the second straight time. Notably, comparable sales increased for the 13th consecutive quarter. The metric gained from strength in the digital channel, given customers’ increased shift to online shopping amid coronavirus-led social distancing.
Shares of this Minneapolis, MN-based company are up more than 8% during the pre-market trading session on Aug 19. Further, Target’s shares have gained 14.4% in the past three months compared with the industry’s growth of 12.3%.
This operator of general merchandise stores reported adjusted earnings of $3.38 per share that surpassed the Zacks Consensus Estimate of $1.64, and rose sharply from $1.82 per share reported in the year-ago period. Impressively, solid operating performance helped offset unprecedented investments in team member pay & benefits amid the coronavirus crisis.
The company generated total revenues of $22,975 million that increased 24.7% from the year-ago period and outpaced the Zacks Consensus Estimate of $20,235.1 million. We note that sales jumped 24.8% to $22,696 million, while other revenues were up 16.6% to $279 million.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Let’s Delve Deeper
Markedly, Target witnessed sturdy market-share gains in all five core merchandise categories owing to strong demand. Consumers splurged on office items, video games, décor, domestics and kitchenware as they work, learn, dine and play at home. While electronics sales soared more than 70%, apparel sales rebounded from a 20% decline in the first quarter to double-digit growth in the second quarter. Home and beauty rose by more than 30% and 20%, respectively. Notably, both essentials and food & beverage were up by about 20%.
We note that stores fulfilled more than 90% of the company’s sales in the quarter. Same-day services (Order Pick Up, Drive Up and Shipt) surged 273% and accounted for roughly 6 percentage points of total comparable sales growth. Sales fulfilled by Shipt were up more than 350% year over year and sales through Drive-Up were up more than 700% during the quarter under review. In-store pick-up sales rose more than 60%.
Meanwhile, comparable sales for the quarter increased 24.3%, backed by a 18.8% jump in average basket as consumers consolidated trips amid the pandemic. The number of transactions rose 4.6%. Digital comparable sales soared 195% and added 13.4 percentage points to comparable sales. Comparable stores sales grew 10.9% during the quarter.
Gross margin expanded 30 basis points to 30.9% during the quarter on account of higher sales and lower discounts driven by high sell through rates. Operating margin grew 280 basis points to 10% primarily due to strong expense leverage on solid sales performance.
Target’s debit card penetration shrunk 70 basis points to 11.8%, while credit card penetration fell 200 basis points to 8.7%. Total REDcard penetration declined to 20.5% from the year-ago quarter’s 23.2%.
Other Financial Details
During the reported quarter, Target paid dividends of $330 million. On Mar 25, the company informed that it has suspended its share-buyback plan as part of the company’s efforts to preserve financial flexibility amid the crisis. The company had $4.5 billion remaining under its $5-billion share-buyback program approved last September.
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $7,284 million, long-term debt and other borrowings of $14,188 million and shareholders’ investment of $12,578 million.
3 Stocks Hogging the Limelight
Big Lots (BIG - Free Report) , a Zacks Rank #1 (Strong Buy) stock, has a long-term earnings growth rate of 7.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sprouts Farmers Market (SFM - Free Report) has a trailing four-quarter average earnings surprise of 49.9% and carries a Zacks Rank #2 (Buy).
Dollar General (DG - Free Report) has a long-term earnings growth rate of 12.5%. Currently, it carries a Zacks Rank #2.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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