Target Boosts Forecast in Sign It's Weathering Retail Woes

MINNEAPOLIS, United States — Target Corp. delivered another sign that its comeback is taking hold as stronger online sales helped brighten the retailer's outlook.

Second-quarter sales topped analysts’ estimates on Wednesday, and the company boosted its forecast for the rest of the year. The report helped soothe investors after a rocky earnings season for retailers, sending Target shares up as much as 6.3 percent in early trading.

The results give a tailwind to the $7 billion turnaround plan laid out in February by chief executive officer Brian Cornell. He aims to refurbish stores, open more small locations in cities and speed delivery of online orders. Target needs to up its game as Wal-Mart Stores Inc. reduces prices and Amazon.com Inc. boosts its offering in categories like apparel and beauty, which have long been strongholds of Minneapolis-based Target.

“We will continue to plan prudently as we invest in building our brands, our digital channel, the value we provide our guests and elevating service levels in our stores,” Cornell said in a statement.

Same-store sales increased 1.3 percent in the second quarter, fuelled by a 32 percent increase in online sales. That beat analysts’ average prediction for an 0.7 percent gain, according to Consensus Metrix. The company now expects earnings this year of $4.34 to $4.54 a share, excluding some items. The midpoint of that range is ahead of the $4.41 analysts have estimated.

Target climbed as high as $57.77 in premarket trading in the wake of the results. The shares had declined 25 percent this year through Tuesday.

The upbeat outlook brings a note of optimism to a retail industry with plenty of struggles. Shares of Dick's Sporting Goods Inc. and Coach Inc. both plunged on Tuesday after reporting disappointing results. Even Home Depot Inc., long considered a shopping-centre star, saw its shares fall after its earnings report.

Last week, department-store companies posted mixed results, renewing concerns that the sector is flailing in its attempts to pull out of a slump.

Against that backdrop, Target’s improving numbers are a promising sign. Still, the company has been outpaced by Wal-Mart and Costco Wholesale Corp., its top big-box rivals. Wal-Mart reports its results on Thursday.

By Matthew Boyle; Editors: Caroline Salas Gage, Nick Turner, Thomas Mulier.