Target’s second quarter sales increased 2.8% to $17.4 billion, same store sales grew 2.4% and digital sales increased 30%. Net income on an adjusted basis, excluding expenses related to restructuring, a 2013 data breach and the company’s exist from Canada, increased 97.6% $773 million, or $1.22 a share, from $391 million, or 62 cents, for the period ended August 1. The $1.22 a share adjusted profit figure was well above the company’s forecast range of $1.04 to $1.14 and the consensus analysts’ estimate of $1.11. Target’s performance was initially met with enthusiasm by investors who pushed the retailer’s share price near the 52 week high of $85.01 seen a month earlier. However, the stock retreated after newly appointed COO and former CFO John Mulligaid third quarter same store sales were likely to rise between 1% and 2% with e-commerce sales expected to grow 30%.
“We’re very pleased with our second quarter financial results, as traffic growth, strong sales in our signature categories and continued expense discipline drove better-than-expected profitability,” said Target Chairman and CEO Brian Cornell. “While momentum in our financial results is encouraging, we have much more to accomplish. Looking ahead, we are focused on making further progress against our strategic priorities and are committed to improving operations as we move through he important back-to-school, back-to-college and holiday seasons.”
The company singled out categories such as style, baby, kids and wellness at strong performers, generating same store sales growth three times the company average and contributing to comp growth in the 4% to 5% range in the high margin home and apparel categories.
The momentum evident at Target contrasted sharply to the performance of Walmart’s U.S. division and the market’s reaction the prior day. Shares of Walmart were already near their 52 week low, but when the company missed its second quarter profit forecast and reduced its full year outlook, shares fell by $2.43 to close Aug. 17 at $69.48 and were hitting new lows following the release of Target’s results.
Walmart’s second quarter same store sales did grow a respectable 1.5% at U.S. stores and total sales grew 4.8%, faster than Target’s 2.8% topline growth, but expense pressures caused operating profits to decline 8.2% to $4.8 billion. For more on Walmart’s second quarter situation click here.