MINNEAPOLIS _ Target's shares jumped more than 15% Wednesday morning after the Minneapolis-based retailer reported much stronger sales and profits than expected heading into the holiday shopping season.
Target stock has risen more than 75% this year, surpassing $125 a share Wednesday morning, a record when adjusted for stock splits and higher than that of its rival Walmart.
Target's third-quarter results _ including a 4.5% increase in comparable sales _ showed that its investments in new brands and faster delivery seem to be paying off at a time when other retailers, such as department stores, continue to struggle.
Most notably, Target said apparel sales, which have been soft industrywide, rose more than 10% in the quarter, helping to not only boost overall sales but also to increase its profits since clothing tends to have higher margins. Executives noted the retailer also sold more apparel at regular price without having to discount it.
"Another excellent set of results from Target underlines the fact there is growth available in the consumer economy and that those retailers which inspire and engage customers can grab a slice of it," Neil Saunders, an analyst with GlobalData Retail, said in a statement. "That said, Target has also outperformed the overall retail sector over the third quarter period, showing that it is taking market share from rivals."
Target said its curbside pickup service saw the biggest increase in the quarter among its fulfillment options. Its same-day delivery offering through Shipt also saw big growth as did in-store pickup. These options, which are generally more profitable for Target compared to shipping items, accounted for 80% of the retailer's digital growth in the quarter.
Target also lifted its annual profit outlook for the second time this year after its earnings in its third quarter grew 14.8% to $714 million. When adjusted for one-time items, it earned $1.36 a share, much higher than the $1.19 a share analysts had forecast.
Its overall revenue also topped analysts' expectations at $18.7 billion.
"The Target team did an excellent job serving our guests and executing our strategy throughout the third quarter," CEO Brian Cornell said in a statement. "Our third-quarter results are further proof of the durability of our strategy, as we're seeing industry-leading strength across multiple metrics, from the top line to the bottom line."
For the fourth quarter, which includes the important holiday shopping season, Target said it expects comparable sales growth of 3% to 4%, which is roughly in line with industry forecasts for holiday sales growth.
In the past few months, Target has announced some new partnerships, including one with Disney to open interactive mini-shops in 25 of its stores this year followed by another 40 next year. It has also started powering the website of a scaled-down and revised Toys 'R' Us, which is trying to make a comeback online. Under new leadership, Toys 'R' Us is also opening two small mall-based stores this month after closing all of its big-box stores last year following a bankruptcy. When shoppers want to buy an item on Toysrus.com, they are now redirected to Target's website to make the purchase.
Target's chief merchandising officer for the last three years, Mark Tritton, also left the retailer last month to become CEO of Bed Bath & Beyond. The company has said it will not immediately replace him but instead will split the role between two current merchandising executives.
