MINNEAPOLIS _ Target Corp. raised its outlook for the holiday season as the Minneapolis-based retailer reported that traffic and sales improved this fall.
Its shares were up about 8 percent in the first hour of trading Wednesday morning. With its better-than-expected results for the third quarter, Target joined a number of retailers that in the last week expressed brighter hopes for the holidays amid rising wages and consumer spending.
Target chief executive Brian Cornell spoke about a cautious consumer earlier this year but told analysts and reporters Wednesday morning that he's increasingly optimistic heading into the holidays.
Target now expects comparable sales in the fourth quarter to be in the range of up 1 percent to down 1 percent, a slight improvement from its previous guidance of sales being flat to down 2 percent.
Still, the company faces challenges that include declining grocery sales and soft electronics sales. Executives noted, however, that preorders for Apple's latest iPhone were three times higher than last year.
"It's all about newness," Cathy Smith, Target's chief financial officer, told reporters.
Another continuing challenge is traffic. While it made some gains in the third quarter, Target's store traffic was still down 1.2 percent. To help address that situation, Target has emphasized value in its advertising and store displays.
"While traffic remains our biggest opportunity, we're seeing encouraging improvement compared to the last quarter," Cornell told reporters.
The company said its profit was $608 million, or $1.07 cents a share, in the August-to-October quarter. That's up 11 percent from $549 million, or 88 cents a share, in the same period a year ago. Adjusted for one-time expenses, Target earned $1.04 a share, which was better than the 83 cents analysts had expected.
Same-store sales fell 0.2 percent, near the top of its forecast of flat to 2 percent lower. The company credited a stronger-than-expected back-to-school season, including robust sales in its new Cat & Jack apparel line. Online sales were also quite strong, up 26 percent in the quarter.
Revenue was $16.4 billion, down 6.7 percent from $17.6 billion a year ago, chiefly reflecting the absence of the pharmacy business it sold to CVS Health Corp.
Department stores Macy's, Kohl's and J.C. Penney reported lower quarterly sales in the last week, while the parent of T.J. Maxx and Home Depot posted strong quarterly sales. Wal-Mart and Best Buy will report their quarterly results on Thursday.
For the May to July quarter, Target reported a surprising 2.2 percent drop in traffic and a 1.1 percent decline in comparable sales, some of its worst figures in about two years.
In the last few months, the company lost its chief marketing officer, chief digital officer and grocery chief.
