Retailer raises its forecast for the second half of the year

MINNEAPOLIS – Target Corp. topped earnings estimates for its fiscal second quarter as shoppers returned to its stores. The retailer said revenue rose 9.5% to $25.1 billion in the quarter ending July 31. Adjusted earnings were pegged at $3.64 a share, a 7.7% increase from a year ago and ahead of Wall Street’s consensus estimate of $3.42 per share.

Comparable store sales increased 8.7%, driven entirely by traffic. Digital comps were up 10%, reflecting consumer demand for its same-day services, including Order Pickup, Drive Up and Shipt. Sales through same-day services grew 55% in the second quarter – on top of 270% growth last year.

“In the second quarter, our business generated continued growth on top of record increases a year ago, reinforcing Target’s leadership position in retail,” said Brian Cornell, Target’s president and chief executive officer. “We’ve spent years building and investing in the durable model we have today, which is supported by a differentiated strategy and the best team in retail.”

Since joining Target seven years ago as CEO, Cornell has overseen development of a business model which uses stores as hubs to ship online orders or allows shoppers to pick up their orders in the parking lot. About 95% of sales in the second quarter came from store fulfillment, which includes products bought in stores as well as digital orders fulfilled from stores.

Target is adding four more “sortation” centers later this year or early in 2022, which are designed to clear the backrooms of stores and allow fulfillment to proceed in a more efficient manner.

“Even after unprecedented growth over the last two years, we see much more opportunity ahead of us, and we’re leaning into opportunities to invest in the long-term growth and resiliency of our business,” Cornell said. “Our team and operating model can seamlessly adapt to changes in the environment, and we’re well-positioned to deliver outstanding performance in the back half of the year.”

Target’s fiscal second-quarter sales rose in every merchandise category, the company said, and were lifted by a strong start to the back-to-school shopping season. Apparel sales grew at a double-digit rate, followed by essentials and beauty in the high single-digits.

The strong results prompted Target to raise its forecast for the year. The company now expects comps to increase by high single-digits in the second half of the year. Executives had earlier forecast growth in the single digits.