Target Corp. on Wednesday reported a better-than-expected increase in third-quarter sales as the retailer's merchandise changes are paying off, helping to ease concerns over spending heading into the key holiday shopping season.

Shares in the company, down about 3% this year, rose 1.5% premarket.

Target's results follow Wal-Mart Stores Inc.'s third-quarter report, which showed increased domestic sales but lower profits as recent changes that helped attract shoppers bit into the bottom line. Wal-Mart, which recently cut its long-term guidance, gave an upbeat outlook for the current quarter and helped counter the view that Americans are simply not shopping.

Last week, weak quarterly sales figures from department-store chains including Macy's Inc. and Nordstrom Inc. sent retail stocks tumbling. Meanwhile, the government reported a disappointing increase in October retail sales. But there are pockets of strength, with other retailers such as Home Depot Inc. posting sales gains.

Like Wal-Mart, Target is in the midst of a turnaround and has spruced up stores to attract more customers. Under Chief Executive Brian Cornell, Target has also shifted its focus to core categories of style, baby, children and wellness. In the latest quarter, sales at existing stores grew 1.9%, at the high-end of the increase the company predicted but slower than in recent periods.

The third quarter marked the fourth consecutive quarter of traffic growth, and Target's sales growth continues to be led by signature categories, said Mr. Cornell. Heading into the holiday season, Target issued upbeat fourth-quarter guidance, forecasting $1.48 to $1.58 a share, bracketing the average analyst estimate of $1.54.

In all for the third quarter, Target reported a profit of $549 million, or 87 cents a share, up from $352 million, or 55 cents, a year earlier. Excluding certain items, including investment losses in Canada, earnings rose to 86 cents from 79 cents. Revenue increased 2.1% to $17.61 billion. Analysts projected 86 cents in per-share profit on $17.57 billion in sales, according to Thomson Reuters.

For the year, Target lifted the low-end of the guidance range it has raised several times this year. The company now expects adjusted earnings of $4.65 to $4.75 a share, compared with its earlier range of $4.60 to $4.75 a share.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

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(END) Dow Jones Newswires

November 18, 2015 08:35 ET (13:35 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
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