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Target Shares Spike After Retailer Improves Q2 Outlook

Target Shares Spike After Retailer Improves Q2 Outlook

Better-than-expected traffic and sales pushed the company to raise its guidance for the upcoming quarter.

Target shares jumped on Thursday after the Minneapolis-based retailer gave a positive update on its second quarter performance, saying customer traffic and sales were better than expected during May and June.
 
Target now expects a “modest increase” in comparable sales for the quarter instead of the low single digit decline” it predicted during its last quarterly report.
 
The company also voiced confidence in its earnings per share outlook. Previously, Target predicted adjusted earnings of 95 cents to $1.15 a share. Now, the company is expecting to report “above the high end of its previous guidance range.”
 
Target shares, as a result, were up to about $2.25, a gain of 4.5 percent, as of midday Thursday.
 
“Target’s recent progress reinforces our confidence and commitment to our strategy,” CEO Brian Cornell said in a statement. “We’ve seen additional broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment.”
 
Specifically, its new Cloud Island brand of baby bedroom décor products has shined since its May launch, Cornell said. “Our team will be rolling out four more exclusive brands across Home and Apparel in the next few months, in support of our plan to launch 12 new brands by the end of 2018,” he added.
 
Moreover, Cornell said he was “pleased with the initial results” from Target Restock, the next-day delivery service Target is currently testing in the Twin Cities.
 
Some analysts, as noted by the Star Tribune, remain cautious about the second quarter update. For instance, Chuck Grom, an analyst with equity research firm Gordon Haskett, said the revision was “encouraging” but didn’t signal a total turnaround. Grom suggested Target’s original guidance might have been too conservative to begin with.