4 key takeaways from Target’s Q1 earnings report
- Target beats Wall Street estimates for profit and sales in Q1.
- The retail corporation's adjusted earnings jumped to a record high.
- Target forecasts an up to 9% increase in Q2 comparable sales.
Target Corporation (NYSE: TGT) said on Wednesday its adjusted earnings jumped to a record high in the fiscal first quarter. The company beat Wall Street estimates for profit and sales in Q1.
1. Financial performance
Target reported $2.097 billion (£1.48 billion) of net income in the first quarter that translates to $4.17 per share. In the same quarter last year, its net income was capped at $284 million (56 cents per share).
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On an adjusted basis, the retail corporation earned $3.69 per share – a massive 525% increase from last year. Target’s quarterly sales printed at $23.88 billion versus the year-ago figure of $19.37 billion.
According to FactSet, experts had forecast the company to post $21.75 billion of revenue and $2.21 of EPS. Target also topped analysts’ estimates in the prior quarter (Q4).
2. Comparable sales
Comparable sales, Target added, climbed by 22.9% on the back of a 50% growth in online comparable sales and an 18% increase in in-store sales. FactSet consensus was for a significantly lower 11.9% growth in comparable sales.
Private labels exclusive to Target and owned brands (worth $10 billion) also posted a record quarterly sales growth of 36%. Other notable figures include an over 60% growth in apparel sales, a close to 35% increase in home category sales, an under 20% growth in beauty sales, and about 15% increase in food and beverage sales.
3. Future outlook
For the fiscal second quarter, Target forecasts a 5% to 9% growth in comparable sales. It also expects an up to 9% increase in comparable sales in the remaining two quarters of the year as well. FactSet consensus, however, predicts a 5.4%, 4.3%, and a 3.9% decline in comparable sales in Q2, Q3, and Q4, respectively.
In related news, Target said it intends to spend $4 billion annually over the next several years.
4. CEO’s remarks on CNBC’s “Squawk Box”
Commenting on the future outlook as COVID-19 restrictions start to ease, CEO Brian Cornell said on CNBC’s “Squawk Box”:
“We’re benefitting from investments we’ve been making for years in store experience, our curated home brand and national brand mix, and the fulfilment services that we offer. That combined with our investment in our team, I think we’re seeing continued strength. As we get more clarity around the consumer, the economy, the state of the vaccine, we feel that consumers continue to respond to our in-store experience, the ease and convenience of shopping with our same-day services. They also connect with our curation of great home brands, national brands and the service our team provides every day.”
Impact on the share price
Target shares were reported about 1.5% up in premarket trading on Wednesday. The stock is now exchanging hands at $212 per share versus $178 per share at the start of the year. At the time of writing, Target is valued at $102.71 billion and has a price to earnings ratio of 23.89.