Zapida Bacchus and Amber Norberg last week looked at products in the Cos Bar specialty section at the northeast Minneapolis Target. The Shops at Target feature items from boutiques around the country.
Marisa Wojcik, Special to the Star Tribune
Target's growth in sales tops estimates
- Article by: THOMAS LEE
- Star Tribune
- May 16, 2012 - 9:37 PM
Don't accuse Target Corp. of overconfidence.
While the Minneapolis-based retailer Tuesday boosted its annual profit forecast after a stronger-than-expected first quarter, Target executives say they remain cautious about strength of the economy. They note unseasonably warm weather had just as much to do with the company's strong numbers as any perceived uptick in consumer confidence.
"We believe that the current economic recovery will continue to be slow and uneven," CEO Gregg Steinhafel told analysts during a conference call. "We believe it's prudent to plan our business accordingly, knowing that we can quickly respond, as we did during the first quarter, when an unexpected surge in traffic and sales occurs."
First-quarter sales at stores open for at least a year jumped 5.3 percent, Target's best such performance since 2005. Overall, sales excluding credit card revenue totaled $16.5 billion, a 6.1 percent increase from the $15.6 billion in the same period last year.
The retailer reported net earnings of $697 million, or $1.04 per share. Adjusted earnings per share for the quarter were $1.11 per share, topping Wall Street's expectations of $1.07 per share. Target also raised its earnings guidance for the full year by 5 cents per share, to $4.60 to $4.80 per share.
Target stock rose 24 cents, or 0.44 percent, to close Wednesday at $55.32.
It has been a topsy-turvy year so far for Target. Comparable-store sales jumped more than 7 percent in March and February, thanks mostly to warm weather that drove spring and summer clothing-seeking shoppers to stores.
But in April, Target's same-store sales rose just 1.1 percent, less than the 2.8 percent Wall Street had expected. Some analysts suspect that shoppers were buying earlier instead of buying more.
Daniel Binder, an analyst with Jefferies & Co., wondered if Target's robust first quarter means the retailer will have less to sell in the second quarter. "We suspect the surprise in [strong first-quarter] sales explains lower inventory, and we look for assurances from management that this will not limit second-quarter [sales] potential," Binder wrote in a research note.
Target projects second-quarter same-store sales to increase a modest 3 percent.
Target executives said they were pleased with the rollout of the Shops at Target, a new merchandising program that features products from five boutique shops across the country. But while the Shops earned good reviews, some analysts say they don't expect the initiative to contribute meaningfully to Target's numbers, especially when compared with Missoni and Jason Wu.
"Ultimately, while the product was enticing, the presentation seemed modest relative to the name and we don't anticipate the Shops will drive a significant traffic/sales impact," Christopher Horvers, a retail analyst with JPMorgan, wrote in a recent research note.
"We did not witness lines outside the stores, a rush to the end-caps, or sold out products (although several products are already out of stock online)," Horvers wrote.
Thomas Lee 612-673-4113
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