Target on Wednesday lifted its profit outlook and revealed stronger-than-expected sales growth in a sign the US retailer’s digital efforts meant to compete with online rivals like Amazon have paid off.
The big-box retailer, which is reaping rewards from investing in its digital platform and same-day deliveries, said sales at established Target stores rose 3.4 per cent in the second quarter, topping forecasts for a 3 per cent sales rise on this closely watched like-for-like measure.
Target also increased its full-year adjusted profit forecast to between $5.90 and $6.20 per share, compared with the prior range of $5.75 to $6.05.
Sales through Target’s digital channels grew 34 per cent in the second quarter on a comparable basis, the group said on Wednesday. Its same-day delivery service accounted for nearly 1.5 percentage points of the group’s 3.4 per cent comparable sales growth.
Target’s shares rose as much as 7 per cent in pre-market trading on Wall Street.
Donald Trump is mooting fresh tax cuts to stimulate business investment and consumer spending in the world’s largest economy as White House officials become increasingly nervous that the US president’s trade war with his Chinese counterpart Xi Jinping will crimp GDP growth.
On Tuesday such concerns prompted Home Depot, the world’s biggest home improvement retailer to cut its sales forecast for 2019.
At Target, which sells homewares, clothes, electronics and beauty products at discounted prices across the US, the mood is much more buoyant, however.
“By appealing to shoppers through a compelling assortment, a suite of convenience-driven fulfilment options, competitive prices and an enjoyable shopping experience, we’re increasing Target’s relevancy and deepening the relationship between our guests and our brand,” Target’s chief executive and chairman Brian Cornell said in a statement accompanying the second-quarter results.
Target also returned $669m to shareholders in the form of dividends and buybacks in the second quarter. The group is most of the way through a $5bn share buyback programme and has $1bn of this left to spend.