Target Corp. is bursting into the holiday shopping season this year, touting strong third-quarter earnings as it pushes faster delivery and invests in stores and on new fashion brands.
The retailer raised its expectations for the year, and its stock leaped 14.1% to close at a record high of $126.43 a share.
Target’s quarterly sales of clothing rose 10% year over year, helped by its focus on creating its own brands and updating its clothing displays.
While Target is boosting sales, department stores are struggling to attract shoppers. Kohl’s Corp. has cut its profit outlook for the year after a disappointing third quarter dragged down by poor women’s clothing sales. J.C. Penney Co.’s latest report showed its continued malaise in clothing. Macy’s Inc. and Nordstrom Inc. report Thursday.
“Everyone is chasing the same stuff, and it’s not working,” said Stacey Widlitz, president of SW Retail Advisors. “Target is taking the best of retail and putting it into the store. Or the worst of retail and making it better.”
During a call with reporters Wednesday, Target Chief Executive Brian Cornell said the chain is picking up market share from department stores as well as smaller mall stores. Store remodels have helped, he said, and shoppers who previously bought just household essentials at Target are now picking up clothing and home goods.
Overall, Target’s sales growth in stores that have been open at least a year and online rose 4.5%. For just online, sales rose 31%.
Target is demonstrating how an intense focus on low prices and customer convenience can put traditional retailers on a competitive footing with Amazon.com Inc., which has upended the retail sector. Last week, Walmart Inc. raised its annual profit expectations after reporting strong third-quarter results helped by its grocery business.
Still, the holiday shopping season — the shortest one since 2013 — is expected to be brutally competitive.
Target is spending $50 million more on its payroll this quarter than it did during the same period last year to try to ensure customers can find help when they need it.
The Minneapolis company is also introducing new incentives this holiday season, such as a loyalty program called Target Circle that has signed up more than 35 million people. In an early test of the program, it found that enrolled customers shopped more frequently and spent 2% to 5% more.
It’s also offering a variety of options to buy, including picking up online orders curbside or in the store. Through Shipt, which Target bought in December 2017, shoppers for a fee can get deliveries to their doorstep in a few hours because there is likely a Target store nearby. The company said Wednesday that same-day services accounted for 80% of its third-quarter digital growth.
Target’s third-quarter results were “outstanding across the board,” said Charlie O’Shea, lead retail analyst at Moody’s Investors Service. He added that the company should be able to avoid price cuts and other promotions that can eat into profits.
Third-quarter profit was $714 million, or $1.39 per share, including discontinued operations worth 2 cents. Adjusted earnings came to $1.36 per share, easily beating Wall Street expectations for $1.19 per share.
Revenue was $18.67 billion, also topping projections.
Target now expects adjusted earnings per share of $6.25 to $6.45 in 2019, compared with earlier projections of $5.90 to $6.20.