By Chelsey Dulaney
Target Corp. on Wednesday reported a better-than-expected 52%
increase in profit in its first quarter as its stores attracted
more shoppers who spent more on average.
The company also boosted the bottom end of its full-year outlook
by five cents, now calling for $4.50 to $4.65 a share in
earnings.
Chief Executive Brian Cornell said the company saw strong sales
growth in its apparel, home and beauty categories in the latest
quarter, while digital sales also grew about 38%.
Target is trying to dig itself out of a hole left from several
years of disappointing results, when the retailer failed to
distinguish itself with enough hip products and found itself trying
to stand out with lower prices on commodities goods like toilet
paper and laundry detergent. The long string of weakness--capped by
the disastrous expansion into Canada and a 2013 data breach--caused
executives to rethink Target's purpose and forced the removal of
their prior CEO, Gregg Steinhafel.
Under Mr. Cornell, Target has been working to place more focus
on signature categories like fashion, furniture, baby goods and
beauty products.
The company also is remaking its grocery business,
de-emphasizing packaged and processed from top suppliers like
Campbell Soup Co. in favor of specialty products like fancy sauces
and oils popular among millennials.
In the latest quarter, sales excluding newly opened and closed
stores rose 2.3%, narrowly topping Target's February projection for
growth of 2%.
The increase was driven by a 0.9% uptick in number of
transactions and a 1.4% increase in average transaction value.
In all, for the quarter ended May 2, Target posted a profit of
$635 million, or 98 cents a share, compared with a profit of $418
million, or 66 cents a share, a year earlier.
Earnings from continuing operations, excluding one-time items,
were $1.10 a share. Target had forecast per-share earnings of 95
cents to $1.05, while analysts polled by Thomson Reuters were
looking for $1.03 a share in earnings.
Net sales grew 2.8% to $17.1 billion, meeting analysts's
expectations.
Target booked $16 million in after-tax losses in the quarter
related to exiting its Canada business and spent $3 million in the
quarter related to its data breach.
For the current quarter, Target forecast $1.04 to $1.14 a share
in earnings, while analysts polled by Thomson Reuters had forecast
$1.12 a share.
The results come a day after Wal-Mart Stores Inc. posted a slim
gain in U.S. sales for its first quarter, but the cost of higher
wages and the strong dollar pushed its profit down. Department
stores like Macy's Inc. have also reported soft sales, and
government data for overall retail sales has often been flat or
down in recent months.
Despite lower gas prices, rising wages and low unemployment
rates, the string of lackluster results from retailers has fueled
concern that the economy hit a soft patch at the beginning of the
year.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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