Target cut prices on 5,000 products. Now it's back with a big earnings beat.
As Target CEO Brian Cornell tells it, the retailer's comeback quarter reflects a steady dose of price cuts this summer on 5,000 daily essentials — items where Target was losing market share to rival Walmart (WMT) for several quarters in a row.
Second quarter comparable sales increased 2.0 percent, at the high end of the Company's expectations.
— Traffic grew 3 percent in the second quarter as compared to the prior year, with all six core merchandising categories delivering traffic growth.
— Digital comparable sales grew 8.7 percent. Same-day services saw double digit growth, led by low teens growth in Drive Up and Target Circle 360™ same-day delivery.
— Discretionary sales trends continued to improve meaningfully, with Apparel comparable sales growing more than 3 percent in the quarter.
Second quarter operating income margin rate of 6.4 percent grew 160 basis points compared to the prior year, driven by a higher gross margin rate.
GAAP and Adjusted EPS of $2.57 grew by more than 40 percent compared with last year.
Guidance
For the third quarter, the Company expects a 0 to 2 percent increase in its comparable sales, and GAAP and Adjusted EPS of $2.10 to $2.40.