Target’s profit and sales beat Wall Street expectations, in the latest sign that shoppers are flocking to discount chains as inflation keeps prices high.
The “cheap chic” retailer on Wednesday raised its full-year profit outlook and reported its first quarterly comparable sales increase in more than a year as price cuts drew more shoppers to its stores.
Shares of the Minneapolis-based retailer rose 11% in premarket trading after the company said it raised its 2024 earnings per share guidance to a range of $9.00 to $9.70, from a previous range of $8.60 to $9.60.
Target’s strong numbers came a week after another low-cost retailer, Walmart, reported unexpectedly strong second-quarter same-store sales growth of 4.2%.
Target is slashing prices on more than 5,000 popular items this summer, including bread, soda, paper towels and pet food.
In February, the company introduced a new private-label basics line called Dealworthy, with 400 items, most of which are priced under $10.
Additionally, the company expanded its Good & Gather and Favorite Day brands with 125 new food items.
Target CEO Brian Cornell said shoppers responded to the “newness” and price cuts.
“Consumers have shown incredible resilience despite numerous challenges over the past few years, and that resilience continues today,” Cornell told investors during an earnings call on Wednesday.
While Target and Walmart are benefiting from customers’ preference for lower prices, Home Depot and Lowe’s are bracing for lower profits as homeowners put off renovations and remodeling.
Wholesale retailer Costco has seen same-store sales increase each of the past three months, reaching a growth rate of 5.2% in July.
Target recovered somewhat from a long slump in the second quarter as consumers cut back on discretionary spending, focusing on food and rent.
The Minneapolis-based company reported four consecutive quarters of declines in same-store sales over the past four quarters ending in May.
By the close of trading on Tuesday, Target shares were up just 1%, while Walmart shares have risen 42% this year.
In its most recent quarter, Target reported improving sales of more selective items like clothing and beauty products.
Apparel sales were also a bright spot, rising 3% after several quarters of declines, led by the company’s private-label All In Motion and Wild Fable lines.
The Commerce Department reported last week that retail sales rose 1% from June to July, the biggest increase since January 2023.
The better-than-expected retail data temporarily eased concerns that the economy was weakening under the weight of rising inflation and high interest rates.
With post wire
