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Target Joins Bandwagon, Posts Solid Holiday Sales, Ups View

Zacks

Target Corporation TGT became the latest to join the bandwagon of retailers — Kohl’s Corporation KSS, J. C. Penney JCP and Zumiez ZUMZ — who witnessed strong holiday season sales. Comparable sales for this general merchandise retailer rose 3.4% in the combined November/December period buoyed by healthy store comps, robust traffic and sturdy digital sales. The solid holiday numbers allowed management to lift the view.

Comparable sales across core merchandise categories — Home, Apparel, Food & Beverage, Hardlines and Essentials — were positive. Target now expects digital sales to increase more than 25% for the fourth straight year in fiscal 2017.

Upbeat Outlook

This Minneapolis, MN-based company now projects fourth-quarter fiscal 2017 adjusted earnings in the band of $1.30-$1.40 compared with the prior range of $1.05-$1.25. For the fiscal year, management now forecasts adjusted earnings between $4.64 and $4.74 per share, up from the previous guidance of $4.40-$4.60.


Further, Target now envisions comparable sales to increase approximately 3.4% during the fourth quarter with full year expected to be just over 1%. Taking into account the 53rd week, Target anticipates total sales to increase more than 9% in the final quarter.

The company also provided an initial guidance for fiscal 2018, expecting adjusted earnings from continuing operations to come in the range of $5.15-$5.45 per share with a low-single digit jump in comparable sales.

Consequently, shares of this Zacks Rank #3 (Hold) company were up roughly 3% during the trading session yesterday. We noted that the stock has surged 37.2% in the past six months, compared with the industry’s growth of 29.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Endeavors Undertaken

No wonder Target is trying all means to rapidly adapt to the changes in the retail ecosystem, which is more inclined toward digitalization. The company’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores bode well.

It has also rolled out Target Restock program that allows customers to restock their shipping box with essential items online and get them delivered at door steps by the next business day for a nominal charge. Further, in order to improve supply chain and expand delivery capabilities, the company had acquired Grand Junction.

To tap digital sales this holiday season, Target strengthened relationship with Google by allowing customers nationwide to shop through Google Express, including voice-activated shopping. Target has also made a concerted effort on the front of same-day delivery services by acquiring internet-based grocery delivery service Shipt for $550 million.

Wrapping Up

Retail bellwethers left no stone unturned to make the most of the season that accounts for a sizeable chunk of yearly revenues and profits. Be it early-hour store openings, huge discounts, promotional strategies, price matching and free shipping on online purchases, retailers went the extra mile. No wonder improving labor market, rising disposable income and elevated consumer confidence also played vital roles in lifting retailers’ spirit.

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