Target raises full-year sales forecast amid ongoing turnaround drive

Investing.com - Target (NYSE: TGT) lifted its annual sales target for the second consecutive quarter, in a potential sign of progress in a broad turnaround plan under new CEO Michael Fiddelke.

Excluding benefits from a tariff refund, the company said it now expects full-year profit per share to be $0.75 higher than a prior forecast at the mid-point. Previously, the figure was tipped to be near the high end of a range of $7.50 to $8.50.

Year-on-year net sales are seen growing by roughly 5%, versus an earlier target of around 4% growth.

Speaking in a pre-earnings conference call cited by Reuters, Fiddelke, who took over at the helm of Target in February, said consumers have offered a "strong response" to changes the firm has made to refresh merchandise stocks and slash prices. However, he flagged that "there’s a lot more to come" and Target will still need to "execute well."

For the quarter ending on August, comparable sales rose 3.8%, topping estimates. Target said it had reduced prices on more than 10,000 items in a bid to entice shoppers, with much of the discounts applying to educational supplies as the back-to-school season approaches.

Fiddelke has also focused on stocking shelves with more items, especially key categories like health and wellness and baby care goods, as Target looks to attract more young families.

Analysts have been keeping close tabs on whether Target can continue to hit sales targets during a time when American households, confronted with looming economic uncertainty, may be opting to rein in expenditures. In particular, strategists are curious to see if Target can lower prices without weighing too heavily on margins.

The average size of transaction amounts grew by 0.2% in the second quarter, below expectations of 0.9%. Gross margin edged up 33.7% from 29% in the first quarter, although a key portion of the boost came from a $1 billion tariff refund.

Shares of Target were lower by more than 2% in premarket U.S. trading on Wednesday, but have surged by more than 51% so far this year.

"[T]his is a solid beat-and-raise report even excluding the (large) benefit from tariff refunds and it shows that management around initiatives are bearing fruit. That said, expectations for this Target print were elevated (which means investors might not be too impressed by the upside)," analysts at Vital Knowledge said in a note.

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