Retail major Target Corporation (TGT, Financial) seems to have seen the light of the day with its latest fiscal 2014 third quarter earnings release. For quite some time the company was going through a rough patch ever since the data breach incident took place last year. However, with the latest set of numbers, Target has impressed the Wall Street, beating analyst forecasts. Letâs take a look at the retailerâs performance and how things are shaping up across its businesses.
The numbers of the quarter
Target conducted operations under the leadership Brian Cornell for the first time during the quarter and compared to the past few quarters, the retailerâs third quarter numbers clearly suggest that the company has made some serious steps in turning around its fortune. Revenue for the quarter came at $17.73 billion, translating into a 2.7% increase, up from prior year periodâs $17.26 billion. The bottom line also fared expectations as profit rose 3.1% to $352 million and earnings per share came to $0.54 as against Thomson Reuterâs estimate of $0.47.
Most encouraging about the quarter was the 1.2% increase in sales of stores open more than a year. Target initially expected the figure to come to 1%. However, on the back of event-based shopping such as back-to-school and Halloween, sales figures improved. Again, reducing gas prices also helped the retailer book better numbers. With less amount spent on gas, consumers had more disposable income to spend in the stores. For the coming quarter, Target expects the sales growth to touch the 2% mark.
Targetâs digital and mobile sales
Other notable wins for Target were the 30% increase in its online sales and the 50% increase in mobile sales. âTarget's digital sales are growing much faster than the industry and they have been accelerating all year and we are planning for even faster growth in the fourth quarterâ said CEO Brian Cornell during the earnings call.
The retailer has been investing to develop its distribution network. Last year Target faced issues related to delivery because of bad weather. Now the focus is on shipping packages from their own stores that are located closer to the customers compared to a few distribution centers located across the geography. The retailer plans to make the digital experience become increasingly personalized for each buyer. For the coming quarter, target expects digital sales growth to gain momentum and reach 40% by the end of the period.
The situation in Canada
For Target, Canada has been a strategic decision. However, its experience in the geography has been not exactly what the company had hoped for. The troubled retailer has been working to recover from the damage caused by the mismanagement in the inventory management system that lead to inadequate quantities of products and higher prices compared to competition. During the third quarter the retailer did witness some improvement with sales surging 43.8%, and management was happy that the improvements came just ahead of the biggest holiday season of the year.
Now, several analysts believe the performance in the fourth quarter will be a key element in Targetâs decision to continue operations in Canada or not, as understood from CFO John Mulliganâs statement - âWe need to get through the fourth quarter and assess how the business progresses.â However, Target management is optimistic about the overall situation and Brian mentioned, âIn Canada we are expecting much better fourth quarter performance than we experienced last year. But we know that to succeed in Canada we will need a major step change in performance.â
Parting thoughts
Industry experts and analysts are optimistic about Targetâs growth prospects with Black Friday just âround the corner. Moreover, the retailerâs latest offer of free shipping on all items bought during the holiday season will attract more buyers. In fact, since the launch of the offer, the company has already witnessed a higher conversion rate of people adding items in cart and finally making the purchase. Coming to in-store retail, âTarget has rolled out new apparel displays that use mannequins to 650 U.S. stores to better tempt shoppers with its clothingâ according to a Reuters report. The retailer is up on its toes and itâs taking initiatives to drive up sales and foot fall. Taking all these into consideration, investors can expect a better set of numbers in the coming quarter.
