Target Maintains Its Outperformer Ranking By Smashing Estimates, Yet Again!

Target Corporation's (NYSE: TGT) business model has been enormously successful with its stock hitting all-time-highs.

Benzinga · 11/20/2019 15:04

Target Corporation's (NYSE: TGT) business model has been enormously successful with its stock hitting all-time-highs. Its second quarter earnings exceeded Wall Street expectations, and now the company has maintained its retail outperformer status by smashing analysts' expectation with its third quarter results. Shares surged more than 10% in premarket trading as the company outperformed both earnings and sales expectations, with the company raising its full year profit outlook as the holiday season is around the corner.

Third Quarter Results

After weak results of Kohl's Corporation (NYSE: KSS), Target again succeeded in creating a bright spot in retail. For the period ended November 2, adjusted earnings per share came to $1.36 compared to $1.19. Achieved revenue amounted to $18.67 billion as opposed to analyst's estimation of $18.49. Total revenue grew 4.7% comparing to the previous year's quarter.

Sales at stores which were open for at least 12 months along with online sales grew 4.5% also exceeding the expected 3.6%. In fact, digital sales witnessed an impressive growth rate of 31%.

The company has upgraded its full-year adjusted earnings per share which are expected in the range of $6.25 to $6.45, whereas the prior estimate was $5.90 to $6.20. Net income grew from $622 million to $714 million from the same quarter last year.

Successful Strategy

Wall Street has expected a successful report to Target's brand strategy that has become a model for struggling retailers. To keep shoppers happy, Target partnered with celebrity designers to create popular lines that sell out quickly. It opened small-format locations at trending locations like New York and around campuses, refurbished its existing store design and even launched a grocery line. They even joined forces with the Walt Disney Company (NYSE: DIS) so some Target stores also have a mini Disney shop within their offerings. Although its big box competitor Walmart Inc (NYSE: WMT) who also just reported better than expected earnings last week. Although Walmart has a beyond massive market cap of $341 billion with Target having $56.5 billion, do not be fooled by size as Target's stock rose at an impressive growth rate of 67% since the beginning of the year.

And even though the big box retailer's e-commerce sales were up 41% during the most recent quarter, Walmart admitted it still has more work to do online. And with Amazon.com, Inc. (NASDAQ: AMZN) "pulling out the big guns", the online competition is only getting more intense. Target might be weaker in the groceries segment, but it holds a stronger position with so-called ‘toys' or athleisure: namely, apparel, beauty and home goods, while also launching more in-house brands. So, if you think of the holiday season of gift giving- all seems to be working out in Target's favour.

Outlook

Third quarter results are just another proof of the durability of the company's strategy- so here's a big applause for the company's top management. Target enabled customers to easily find the products they need, whether in store or online and the range is beyond wide. 2018 holiday season was Target's most successful over a decade, and there's no reason to think 2019 will have trouble keeping up.

Target announced in October that it will increase spending by $50 million comparing to last year's comparable quarter and due to payroll. With overtime and increased number of employees, Target seems determined to maintain its status as a ‘retail outperformer', with the ‘holiday' fortune on its side!

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