Target Corp's second-quarter sales and profit beat estimates on Wednesday, helped by strong online sales and higher customer visits that grew the most in a decade, sending its shares up 6% in pre-market trade.
The Minneapolis-based retailer also raised its profit forecast for the year after comparable sales including stores and online grew the most in 13 years.
Rising wages, lower unemployment and tax cuts have put more money in US consumers' pockets this year spurring them to shop more.
That has translated to rising sales for retailers including Target's rivals like Walmart Inc and Nordstrom Inc.
Demise Of Weaker Competitors
Target has benefitted from the demise of weaker competitors in the past year.
Retail chains including Toys 'R' Us Inc and department store operator Bon Ton Store Inc have either shut down operations or filed for bankruptcy this year.
Roughly 4,000 retail stores had shut in the US this year through 10 August, according to Coresight Research.
The retailer's performance was also boosted by ongoing investments in its online operations, store remodels and price cuts in grocery that have helped it compete with rivals.
It cut its next-day delivery fee for household essentials to $2.99 from $4.99 and is rolling out a new drive-up service where shoppers can pick up orders in an hour.
Target is also expanding its delivery services through Shipt, a same-day delivery company it bought for $550 million last year, and partnering with courier services on same-day orders in metro areas.
Outlook
The retailer has said it plans capital expenditure of $3 billion (€2.6 billion) this year on its supply chain, online delivery, its own brands and merging online and in-store shopping.
In February last year, the retailer said it would reinvest more than $7 billion (€6.1 billion) through 2020.
Second-quarter same-store sales at Target were higher than estimates, rising 4.9%. Analysts expected a 3.99% increase, according to Thomson Reuters I/B/E/S. Customer traffic at its stores grew 6.4%.
Online sales rose 41% in the second quarter, up from a 32% rise a year ago and above the 28% rise in the first quarter.
Excluding items, Target earned a profit of $1.47 per share in the quarter ended 4 August, higher than the average analyst estimate of $1.40.
Margins continued to remain under pressure from investments in e-commerce. The second quarter gross margin rate was 30.3%, compared with 30.4% during the same period in 2017.
Revenue rose to $17.8 billion (€15.4 billion), topping an average estimate of $17.31 billion (€15 billion).
Shares of the Minneapolis-based chain have risen more than 27% so far in 2018 and over 47% in the past 12 months.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
