Why Target Stock Keeps Going Up
Key Points
Price cuts are luring shoppers back to Target's stores.
The company's profits are surging.
- 10 stocks we like better than Target ›
Shares of Target (NYSE: TGT) rose over 7% this past week after the retail giant gave investors more evidence that its turnaround plan is working.
Image source: Target.
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Refocusing on value
Target is returning to its discount roots. The big-box chain slashed prices on over 10,000 items during the past year. It's also investing in store redesigns and upgrading its merchandise assortments.
The strategy is clearly resonating with consumers.
Target's net sales climbed 5.3% year over year to $26.5 billion in its fiscal second quarter, which ended on Aug. 1.
The retailer saw sales gains in its stores and online channels, as well as across all six of its core merchandising categories.
Comparable store sales, which include revenue at locations open for 13 months or longer, increased 2.7%, driven by higher customer traffic.
Digital comparable sales, which include orders placed through Target.com or the Target app, jumped 8.7%, fueled by a 25% surge in same-day delivery services.
These revenue gains, combined with tariff refunds, helped Target's adjusted earnings more than double to $4.11 per share. Even excluding those tariff refunds, the company's adjusted per-share profits grew 20%.
Raised guidance
These encouraging results prompted Target to boost its growth forecast. Management now sees full-year net sales rising by roughly 5%, resulting in adjusted earnings per share of $9.90 to $10.90.
"We're encouraged by another quarter of healthy top-line growth and improving underlying profitability," chief financial officer Jim Lee said during a conference call with analysts. "At the same time, we have a lot more work ahead of us to realize the long-run potential of our business."
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.
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