• Jennifer Marks

Five key takeaways from Target’s Q2 analyst call

Fiscal year guidance raised

Minneapolis – Target executives this morning outlined new initiatives in home, fulfillment and digital growth.

The key takeaways:

  • Home is the most common category purchased for same-day delivery in the test Target is running at its NYC Tribeca store. The same-day test will expand to other New York locations this fall.
  • Digital was an important growth driver for home in the second quarter, with particularly strong performance coming from Target’s in-house Threshold brand.
  • The new home brand Project 62, which rolls out next month in stores and online, has been developed with urban dwellers in mind in terms of both design sensibility and product flexibility.
  • Cloud Island, the nursery collection launched in late May, has been generating double-digit comp increases.
  • Target’s swing toward everyday pricing produced a meaningful increase in the percentage of business done on price during the second quarter and a meaningful decease in the percent of business done on promotion.
  • Ship from store accounted for more than 40% of digital units shipped in first half of the fiscal year. This fall, the program will roll out to another 350 stores for total of more than 1,400 stores.

“We continue to see market share gains in apparel, in home and in hardlines,” said Brian Cornell, chairman and ceo. “We’re well positioned to emerge as one of the winners in retail.”

The company out-performed expectations during the quarter ended July 29. Net earnings slipped 1.2% to $672 million, or $1.22 per share. Sales rose 1.6% to $16.4 billion, with comp up 1.3%.

The results prompted Target to raise its fiscal year guidance today. It now expects adjusted earnings from $4.34 to $4.54 per share vs. a previous forecast of just over $4. However, it believes sales growth for the remainder of the fiscal year to similar to that of the first half, which has been flattish at up 0.3%.

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