Target turnaround: Earnings beat expectations

August 19 23:42 2015

Target’s (TGT) turnaround strategy under CEO Brian Cornell appears to be paying off, with the retailer reporting second-quarter earnings well above Wall Street expectations Wednesday. Target also said that sales in certain priority categories are on a steady uptick. Cornell, who came to Target last August, has been trying to reinvigorate the retailer’s merchandise and presentation when it comes to fashion and apparel, baby, kids and wellness. As a group, those categories saw same-store sales grow three times as fast as the company average in the second quarter.Data Security Breach Affects Target Corp

The retailer reported net income of  $753 million, or $1.18 a share. Adjusted earnings, excluding some items, came in at $1.22 a share. That was above analyst expectations for $1.11 a share, according to Thomson Reuters I/B/E/S. Sales were $17.43 billion, up 2.8% from the same quarter a year ago, and beat estimates for revenue of $17.39 billion.

“We’re very pleased with our second quarter financial results, as traffic growth, strong sales in our signature categories and continued expense discipline drove better-than-expected profitability,” Cornell said in a statement. Sales at stores open at least a year, a key retail metric,  grew 2.4%, helped by growth in those core categories. Earlier this year, Cornell and other Target executives outlined a roughly $2 billion plan to grow the business with more efficient operations and a more compelling mix of products, such as reupping its status for having fashionable and trendy apparel.

“We’re confident we’re focused on the right strategies because we are starting to see our guests respond,” said Chief Financial Officer John Mulligan on a call with media. Mulligan will move to the post of chief operating officer in September, while Cathy Smith, a former executive with Express Scripts and Walmart International, will become CFO. Target has invested in upgraded store presentation, particularly for apparel, where the brand is in the process of rolling out mannequins. Swim and denim were standouts in the quarter, Mulligan said, due to better presentation and the fact that the brand changed the fit and fabric of its denim.