Shares of retailer target reached record highs after the company reported better than expected second quarter performance in all aspects.
The company reported a 17 per cent increase in the quarterly profit as it was able to attract more customers and thereby generate more revenues because of its in-store pickup and same-day shipping services. The company also bettered its outlook of the rest of the year.
The retailer also beat Wall Street estimates for the sale revenues generated at its stores that have been open for at least a year with a growth of 3.4 per cent during the quarter. Almost 1.5 percentage points of its overall same-store sales growth was accounted for by the company’s same-day fulfillment services, including order pickup, drive up and Shipt same-day delivery business, Target said.
The performance pushed Target’s share up by 129 per cent to reach a record high of $102 per share.
According to data from Refinitiv, the major concern for the retailers including Target is to find ways that can increase convenience of shopping for customers. The retailers are also investing huge money into their websites and into reducing delivery times so as to complete with Amazon. The retailers with physical stores are also banking on the trend among customers of picking up their orders at the store because it is typically much faster than waiting for the products to get delivered.
“These options offer speed, convenience and reliability,” Target CEO Brian Cornell told analysts on a call Wednesday. “And as a result, they’re quickly becoming the fulfillment choices for our guests. And most importantly, because these options leverage our existing in-store infrastructure, technology and teams, same-day fulfillment delivers outstanding financial performance as well.”
A plan to turnaround the ailing retailer was implemented by Target in 2017. And at the core of that rehash plan was to remodel its stores and efficiently amalgamating its stores and online sale channels and shopping experience. Analysts said that the plan apparently seemed to be working if the second quarter performance of the company is considered.
“This is as good a quarter as Target possibly could have had,” Moody’s analyst Charles O’Shea said in a TV interview.
Target reported a jump of almost 17 per cent in profits to touch $938 million, or $1.82 a share, which were $799 million, or $1.49 per share respectively in the same period a year ago. The earnings per share beat analysts and market estimates by 20 cents as markets expected it to come at $1.62 per share according to data from Refinitiv. There was a 3.6 per cent growth in total revenue to touch $18.42 billion compared to $17.78 billion in the same period a year ago, beating market expectations of $18.34 billion.
Further, the company also reported a 3.4 per cent growth in the sales at its stores open for at least 12 months and from its website while the market was expecting the number to be at 2.9 per cent. However the growth in the digital sale revenue, which came in at 24 per cent, was lower than the 42 per cent that had been reported by the company in the previous quarter.
“As we’ve been saying for years we believe that in-store shopping will continue to be important and account for the vast majority of retail sales for many years to come,” Target’s Chief Operating Officer John Mulligan said Wednesday on the earnings call. “However, in a world where consumers have more choices than ever, inferior brick-and-mortar experiences will go away. That’s why we’re investing heavily both in our store assets and in the experience our team provides.”
(Adapted from CNBC.com)