Before the market open on Wednesday, Aug. 15, the big-box retailer reported second-quarter earnings of $1.23 a share, flat compared to earnings of $1.23 a share posted a year ago. But, they did manage to beat Wall Street forecasts for $1.19 a share. Target's revenue of $16.4 billion was higher than last year's $16.17 billion, and Wall Street's estimates for $16.27 billion.
The company's same-store sales rose 1.3% in the quarter, helped by a surprising 2.1% lift in traffic. Comparable online sales grew 32%.
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Shares of Target rose nearly 5% in pre-market trading.
For the full year, Target expects earnings in the range of $4.34 to $4.54 a share and third-quarter earnings of 75 cents to 95 cents a share. Previously, Target saw full year earnings of $3.80 to $4.20 a share.
"When we're at our best, we deliver inspiration and convenience," Target Chairman and CEO Brian Cornell said on an earnings call with analysts Wednesday morning.
Cornell noted that in the quarter, the retailer saw double-digit sales growth in its private-label brands but revenue from food and beverage was only flat, as grocery remains a pressured segment for the company.
The better-than-expected earnings release comes after Target announced on Monday its plans to acquire Grand Junction, a transportation tech company headquartered in San Francisco, that the retailer said will help it enhance its delivery options to eventually offer same-day shipping. The company also said it began testing Target Restock, its next-day delivery service used for household essentials only, to the Dallas and Denver markets, after launching the pilot service in June in Minneapolis.
On the call Cornell said Target began testing same-day shipping at its Tribeca, N.Y., store and will roll it out to other New York City locations this year. The retailer also is testing a drive-in, pickup option where employees will deliver packages to customers car-side.
Target's deal is a clear play at keeping up with Walmart Stores Inc. (WMT) , which has been on a recent acquisition frenzy that began with its blockbuster $3.3 billion purchase of e-commerce company Jet.com last August. Walmart's acquisition of Jet led it to grow its online sales by 63% in the first quarter, begin testing same-day shipping and upgrade its stores with futuristic enhancements, such as launching an automated pickup tower, which creates a seamless way for customers to pick up small packages.
"We remain concerned about the threat from e-commerce competition, including declining traffic trends to terrestrial retail, but we believe Target is likely to be a retail survivor," John Zolidis, president of Quo Vadis Capital Inc., said in a research note on Wednesday morning.
Wondering what else Walmart is up to?
Investors are anxiously awaiting Walmart's second-quarter earnings release, set to be dropped on Thursday. Barclays analyst Karen Short said in a recent research note that she expects Walmart's second-quarter online sales to be just as strong as they were in the first quarter.
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