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Target Corporation (TGT - Free Report) continued with its stellar performance in first-quarter fiscal 2021, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also grew year over year. The quarter marked fifth straight sales and earnings beat. Notably, comparable sales increased for the 16th successive quarter. The metric gained from strength in both store and the digital channel.
Evidently, mass inoculation drive and the passing of a coronavirus relief package triggered spending across the board. Well, demand was not restricted to a few categories as was noticed when the coronavirus crisis gripped the economy.
Undeniably, Target has been focusing on store refurbishments, enhancing digital capabilities and expanding same-day fulfillment options, keeping in mind speed and convenience. Management informed that the company gained more than $1 billion in market share during the quarter under review, on top of $1 billion in share gains a year ago.
We note that shares of this Minneapolis, MN-based company have increased 20.6% in the past six months compared with the industry’s gain of 11.4%.
Sales & Earnings Picture
Target reported adjusted earnings of $3.69 per share that outshone the Zacks Consensus Estimate of $2.26, and rose sharply from 59 cents reported in the year-ago period.
This general merchandise retailer generated total revenues of $24,197 million that increased 23.4% from the year-ago period and outpaced the Zacks Consensus Estimate of $22,286 million. We note that sales jumped 23.3% to $23,879 million, while other revenues were up 30.4% to $318 million. Markedly, the company’s owned brand registered sales growth of 36%.
Target Corporation Price, Consensus and EPS Surprise
We note that increase in sales was led by Apparel, Home, Hardlines, Beauty, Essentials and Food & Beverage categories. While Apparel soared at a low 60% range, Home category rose nearly mid 30% range in the quarter. Hardlines increased more than 30%, while Beauty grew in high teens. Both Essentials and Food & Beverage witnessed low-to-mid single digit growth.
We note that stores fulfilled more than 95% of the company’s sales in the quarter. Same-day services (Order Pick Up, Drive Up and Shipt) grew more than 90%. Sales fulfilled by Shipt were up nearly 86% year over year and sales through Drive-Up were up 123% during the quarter under review. Order Pickup rose 52% in the quarter.
Meanwhile, comparable sales for the quarter increased 22.9%, backed by 17.1% jump in number of transactions. Also, average transaction amount grew 5%. Notably, digital comparable sales soared 50.2%, while comparable stores sales grew 18% during the quarter.
Target’s debit card penetration contracted 60 basis points to 12.1%, while credit card penetration fell 130 basis points to 8.4%. Total REDcard penetration declined to 20.5% from the year-ago quarter’s 22.4%.
Margins
Gross margin expanded 490 basis points to 30% during the quarter, gaining from favorable category mix and merchandising actions, mainly from low markdown rates. Meanwhile, operating margin grew 740 basis points to 9.8%.
Other Financial Details
During the first quarter, Target paid dividends of $340 million. This reflected an increase of 3% in the dividend per share. Impressively, the company also recommenced share buyback in the quarter. The company repurchased shares worth $1.2 billion, thereby retiring 6.1 million shares at an average price of $190.77. At the end of the quarter, the company had roughly $3.4 billion remaining under its share-buyback program approved in September 2019.
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $7,816 million, long-term debt and other borrowings of $11,509 million and shareholders’ investment of $14,959 million.
Outlook
Management envisions mid-to-high single digit growth in comparable sales during the second quarter of fiscal 2021. The company anticipates second-quarter operating margin rate to be well above second-quarter fiscal 2019 rate of 7.2% but is unlikely to be as high as last year’s exceptional rate of 10%.
Target also guided positive single-digit comparable sales growth for the last two quarters of the fiscal year. It also projected full-year operating margin rate to be well above fiscal 2020 rate of 7% and added that the rate could hit 8% or more.
The Children's Place (PLCE - Free Report) has a long-term earnings growth rate of 8%. Currently, it sports a Zacks Rank #1.
Tapestry (TPR - Free Report) has a long-term earnings growth rate of 10%. The stock carries a Zacks Rank #2 (Buy).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
Target's (TGT) Q1 Earnings Top, Comparable Sales Increase Y/Y
Target Corporation (TGT - Free Report) continued with its stellar performance in first-quarter fiscal 2021, wherein both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also grew year over year. The quarter marked fifth straight sales and earnings beat. Notably, comparable sales increased for the 16th successive quarter. The metric gained from strength in both store and the digital channel.
Evidently, mass inoculation drive and the passing of a coronavirus relief package triggered spending across the board. Well, demand was not restricted to a few categories as was noticed when the coronavirus crisis gripped the economy.
Undeniably, Target has been focusing on store refurbishments, enhancing digital capabilities and expanding same-day fulfillment options, keeping in mind speed and convenience. Management informed that the company gained more than $1 billion in market share during the quarter under review, on top of $1 billion in share gains a year ago.
We note that shares of this Minneapolis, MN-based company have increased 20.6% in the past six months compared with the industry’s gain of 11.4%.
Sales & Earnings Picture
Target reported adjusted earnings of $3.69 per share that outshone the Zacks Consensus Estimate of $2.26, and rose sharply from 59 cents reported in the year-ago period.
This general merchandise retailer generated total revenues of $24,197 million that increased 23.4% from the year-ago period and outpaced the Zacks Consensus Estimate of $22,286 million. We note that sales jumped 23.3% to $23,879 million, while other revenues were up 30.4% to $318 million. Markedly, the company’s owned brand registered sales growth of 36%.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
Let’s Delve Deeper
We note that increase in sales was led by Apparel, Home, Hardlines, Beauty, Essentials and Food & Beverage categories. While Apparel soared at a low 60% range, Home category rose nearly mid 30% range in the quarter. Hardlines increased more than 30%, while Beauty grew in high teens. Both Essentials and Food & Beverage witnessed low-to-mid single digit growth.
We note that stores fulfilled more than 95% of the company’s sales in the quarter. Same-day services (Order Pick Up, Drive Up and Shipt) grew more than 90%. Sales fulfilled by Shipt were up nearly 86% year over year and sales through Drive-Up were up 123% during the quarter under review. Order Pickup rose 52% in the quarter.
Meanwhile, comparable sales for the quarter increased 22.9%, backed by 17.1% jump in number of transactions. Also, average transaction amount grew 5%. Notably, digital comparable sales soared 50.2%, while comparable stores sales grew 18% during the quarter.
Target’s debit card penetration contracted 60 basis points to 12.1%, while credit card penetration fell 130 basis points to 8.4%. Total REDcard penetration declined to 20.5% from the year-ago quarter’s 22.4%.
Margins
Gross margin expanded 490 basis points to 30% during the quarter, gaining from favorable category mix and merchandising actions, mainly from low markdown rates. Meanwhile, operating margin grew 740 basis points to 9.8%.
Other Financial Details
During the first quarter, Target paid dividends of $340 million. This reflected an increase of 3% in the dividend per share. Impressively, the company also recommenced share buyback in the quarter. The company repurchased shares worth $1.2 billion, thereby retiring 6.1 million shares at an average price of $190.77. At the end of the quarter, the company had roughly $3.4 billion remaining under its share-buyback program approved in September 2019.
This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $7,816 million, long-term debt and other borrowings of $11,509 million and shareholders’ investment of $14,959 million.
Outlook
Management envisions mid-to-high single digit growth in comparable sales during the second quarter of fiscal 2021. The company anticipates second-quarter operating margin rate to be well above second-quarter fiscal 2019 rate of 7.2% but is unlikely to be as high as last year’s exceptional rate of 10%.
Target also guided positive single-digit comparable sales growth for the last two quarters of the fiscal year. It also projected full-year operating margin rate to be well above fiscal 2020 rate of 7% and added that the rate could hit 8% or more.
3 Stocks Hogging the Limelight
Boot Barn Holdings (BOOT - Free Report) , a Zacks Rank #1 stock (Strong Buy), has a trailing four-quarter earnings surprise of 51.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Children's Place (PLCE - Free Report) has a long-term earnings growth rate of 8%. Currently, it sports a Zacks Rank #1.
Tapestry (TPR - Free Report) has a long-term earnings growth rate of 10%. The stock carries a Zacks Rank #2 (Buy).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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