New and exclusive private-label brands, better digital and brick-and-mortar cohesion and a focus on fine-tuning pricing and promotions may have created the secret sauce for Target Corp. in the most recent quarter — driving its store traffic up more than 2 percent amid industrywide declines.
Investors are giving a boost to the retailer’s shares this morning on the heels of its solid second-quarter performance that has offered a glimmer of hope in a pressured retail environment. As of 10:50 a.m. ET, shares remained up nearly 3 percent at $55.89.
Target’s Q2 sales improved 1.6 percent year-over-year to $16.4 billion. Analysts had expected sales of $16.3 billion. Comps also bested estimates, gaining 1.3 percent year-over-year.
Meanwhile, profits declined 1.2 percent to $672 million, or $1.22 per diluted share. But on an adjusted basis, diluted earnings per share were $1.23, handily topping forecasts for diluted EPS of $1.19.
Target chairman and CEO Brian Cornell told investors the company’s traffic improvements were “broad-based across the country, across categories and across channels.”
“And while the consumer and competitive environment remain choppy, better-than-expected performance occurred throughout the quarter and wasn’t limited to a short period within the quarter,” Cornell added. “With better second-quarter traffic, we saw improved performance across each of our five broad merchandising categories: Apparel, Home, Food and Beverage, Essentials and Hardlines.”
Target — which in July announced its plan to discontinue several of its exclusive brands and add 12 new and niche ones — has accelerated its development and rollout of exclusive labels following the launch of Cat & Jack among other private brands last year. (Just a year and a half since its launch, Cat & Jack’s revenues have already crossed the $2 billion mark, according to Cornell.)
Cornell said the retailer — which has been on the radar of market watchers in the wake of Amazon’s and Walmart’s aggressive wheeling and dealing — is making progress on several areas, including reining in promotions and expanding digital, which grew 32 percent during the period.
“As a result of our comprehensive effort by our team to reduce friction and increase the reliability of our digital operations, we have seen meaningful declines in guest contact center activity related to digital,” Cornell noted. “This is a tangible reflection of our work to create a stable digital platform and successful collaboration between our digital, operations and merchandising teams to create a more cohesive experience for our guests.”
To build on the momentum, the retailer is testing and rolling out additional fulfillment platforms, including Target Restock, a next-day delivery option for everyday essentials.