In recent years Target Corporation (TGT Stock Report ) stock has attracted divided opinion from both bears and bulls. Bulls have held the sentiment size of Target and digital transformation will help Target maintain a competitive edge in the market. Bears, on the other hand, had warned that the company will struggle and play catch up to Walmart Inc. (WMT Stock Report ) and Amazon.com Inc. (AMZN Stock Report )
Robust Growth In Q2
Recently the company reported a better than expected second quarter and it’s stock surged to an all-time high of $100 per share. The company bettered revenue estimates by $100 million after reporting a 4% increase in revenue to $18.4 billion. Equally adjusted earnings rose by 24% to around $1.82 per share beating expectations by $0.20.
In the second quarter Target’s comparable-store sales topped expectations of 3% growth by registering 3.4% in a segment that has been tough for most retailers. In the third quarter, the company expects to keep the momentum and maintain the 3.4% comp growth. The growth is attributed to bigger purchases per shopper, increasing traffic at the company’s stores, and steady demand for grocery and home beauty products.
Digital Growth Increase By 34%
The company’s digital comp received a 34% boost in the quarter which was 1.8% of total comps growth. The growth is attributed to the growing popularity if same-day fulfillment services such as Shipt, Drive Up and Order Pick Up which have widened its moat against other retailers. Its massive network of retail stores has been vital as they act as fulfillment centers.
Although digital growth weighs down on margins of retailers, Target nonetheless managed to report expanded gross and operating margins sequentially and annually in the second quarter. This is a result of new strategies to optimize prices, costs, and promotions as well as an enhanced mix of products on shelves.
Target has predicted that its steady sales, string margins, and buybacks will enhance its adjusted EPS to increase by 5% in the first half and by 12% for the full year. The company expects positive sales and earnings growth in 2019.