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Target Corporation (TGT - Free Report) came up with second-quarter fiscal 2024 results, wherein the top and bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The company achieved comparable sales growth in the quarter, rebounding from past challenges. The retail bellwether witnessed increased traffic both in stores and across digital channels. Markedly, trends improved in discretionary categories, particularly in apparel, along with continued strength in the beauty segment.
Following better-than-expected results, this Minneapolis, MN-based company raised its fiscal 2024 earnings projection. We believe Target is poised to capture market share over time, driven by its compelling value proposition and a spectrum of initiatives. These encompass the expansion of new stores, innovations in brands, the enhancement of same-day services and the rollout of the Target Circle loyalty program to drive traffic.
Sales & Earnings Picture
Target reported adjusted earnings of $2.57 per share, which surpassed the Zacks Consensus Estimate of $2.16 and improved sharply from $1.80 reported in the year-ago period.
The big-box retailer generated total revenues of $25,452 million, which came ahead of the Zacks Consensus Estimate of $25,229 million. The metric improved 2.7% on a year-over-year basis. We note that sales rose 2.6% to $25,021 million, while other revenues jumped 10.8% to $431 million.
Meanwhile, comparable sales rose 2% in the second quarter, following a decline of 3.7% in the preceding quarter. The metric reflected an increase of 0.7% and 8.7% in comparable store sales and comparable digital sales, respectively. We had expected a comparable sales increase of 1% for the quarter under discussion.
Target Corporation Price, Consensus and EPS Surprise
The gross margin expanded by 190 basis points to 28.9%, faring better than our expectation of a 110-basis point increase. This can be attributed to effective merchandising strategies that included cost reductions outweighing the impact of higher promotional markdowns, as well as a favorable category mix. This was partly offset by higher digital fulfillment and supply-chain costs. Concurrently, the operating margin rose to 6.4% from 4.8% in the corresponding period last year. We had anticipated a 70-basis point improvement in the operating margin.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $3,497 million, long-term debt and other borrowings of $13,654 million and shareholders’ investment of $14,429 million. During the quarter, Target paid out dividends of $509 million.
Target repurchased 1.1 million shares worth $155 million during the quarter under review. At the end of the quarter, the company had about $9.5 billion remaining under the repurchase program approved in August 2021.
Outlook
Target anticipates comparable sales to be flat to up 2% in the third quarter of fiscal 2024. Both GAAP and adjusted earnings for the third quarter are expected to fall in the range of $2.10-$2.40 per share compared with $2.10 reported in the year-ago period.
For fiscal 2024, management continued to guide comparable sales, ranging from flat to 2%. However, Target now anticipates that the growth will more likely fall toward the lower half of this range. GAAP EPS and adjusted earnings for the fiscal year are now projected in the band of $9.00-$9.70 per share compared with $8.94 reported in fiscal 2023. Earlier, the company had guided earnings between $8.60 and $9.60.
We note that shares of Target have declined 4% in the past six months compared to the industry’s growth of 10.6%.
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The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
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Target (TGT) Q2 Earnings Beat Estimates, Comps Rise Y/Y
Target Corporation (TGT - Free Report) came up with second-quarter fiscal 2024 results, wherein the top and bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The company achieved comparable sales growth in the quarter, rebounding from past challenges. The retail bellwether witnessed increased traffic both in stores and across digital channels. Markedly, trends improved in discretionary categories, particularly in apparel, along with continued strength in the beauty segment.
Following better-than-expected results, this Minneapolis, MN-based company raised its fiscal 2024 earnings projection. We believe Target is poised to capture market share over time, driven by its compelling value proposition and a spectrum of initiatives. These encompass the expansion of new stores, innovations in brands, the enhancement of same-day services and the rollout of the Target Circle loyalty program to drive traffic.
Sales & Earnings Picture
Target reported adjusted earnings of $2.57 per share, which surpassed the Zacks Consensus Estimate of $2.16 and improved sharply from $1.80 reported in the year-ago period.
The big-box retailer generated total revenues of $25,452 million, which came ahead of the Zacks Consensus Estimate of $25,229 million. The metric improved 2.7% on a year-over-year basis. We note that sales rose 2.6% to $25,021 million, while other revenues jumped 10.8% to $431 million.
Meanwhile, comparable sales rose 2% in the second quarter, following a decline of 3.7% in the preceding quarter. The metric reflected an increase of 0.7% and 8.7% in comparable store sales and comparable digital sales, respectively. We had expected a comparable sales increase of 1% for the quarter under discussion.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Margins
The gross margin expanded by 190 basis points to 28.9%, faring better than our expectation of a 110-basis point increase. This can be attributed to effective merchandising strategies that included cost reductions outweighing the impact of higher promotional markdowns, as well as a favorable category mix. This was partly offset by higher digital fulfillment and supply-chain costs. Concurrently, the operating margin rose to 6.4% from 4.8% in the corresponding period last year. We had anticipated a 70-basis point improvement in the operating margin.
Other Financial Details
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $3,497 million, long-term debt and other borrowings of $13,654 million and shareholders’ investment of $14,429 million. During the quarter, Target paid out dividends of $509 million.
Target repurchased 1.1 million shares worth $155 million during the quarter under review. At the end of the quarter, the company had about $9.5 billion remaining under the repurchase program approved in August 2021.
Outlook
Target anticipates comparable sales to be flat to up 2% in the third quarter of fiscal 2024. Both GAAP and adjusted earnings for the third quarter are expected to fall in the range of $2.10-$2.40 per share compared with $2.10 reported in the year-ago period.
For fiscal 2024, management continued to guide comparable sales, ranging from flat to 2%. However, Target now anticipates that the growth will more likely fall toward the lower half of this range. GAAP EPS and adjusted earnings for the fiscal year are now projected in the band of $9.00-$9.70 per share compared with $8.94 reported in fiscal 2023. Earlier, the company had guided earnings between $8.60 and $9.60.
We note that shares of Target have declined 4% in the past six months compared to the industry’s growth of 10.6%.
Don’t Miss These Solid Bets
The Chefs' Warehouse (CHEF - Free Report) is a premier distributor of specialty food products in the United States, the Middle East and Canada. It currently sports a Zacks Rank #1 (Strong Buy). CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chefs' current financial-year sales and earnings suggests growth of around 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 18.7%, respectively, from the year-ago reported numbers.
Vital Farms (VITL - Free Report) offers pasture-raised products in the United States. It currently carries a Zacks Rank #2 (Buy). VITL has a trailing four-quarter earnings surprise of 82.5%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings suggests growth of around 26.3% and 88.1%, respectively, from the year-ago reported numbers.