In what could be termed as the biggest short-term relief to all retailers who were suffering sagging sales and facing difficulties in getting customers to walk through their stores, Target (TGT, Financial)Â updated its second-quarter guidance as the company now expects a “modest increase” in second-quarter comparable-store sales.
When Target announced its first-quarter results on May 17, the company provided a dim outlook for the second quarter and said it expects a low single-digit decline in comparable sales, and both GAAP EPS from continuing operations and adjusted EPS of 95 cents to $1.15.
Not everything was bad for Target as it continued to perform well on the online front. Target’s digital sales grew by 23% during the first quarter of 2016, then repeated the performance during the first quarter of 2017, posting 22% growth.
With first-quarter comparable sales declining by 1.3%, the forecast of low single-digit decline during the second quarter meant that the sales decline was accelerating instead of stabilizing. That’s bad news for any retailer as the current environment continues to be extremely competitive with Walmart (WMT, Financial) and Amazon (AMZN, Financial) doing extremely well.
Target updated its guidance for second-quarter earnings on July 13, due to increase in traffic and improving sales trends during the first two months of the quarter. Apart from changing comparable-store sales from a negative expectation to a positive one, Target now expects second-quarter GAAP and adjusted EPS above the high end of the previous guidance range of 95 cents to $1.15.
The good news dragged most retail stocks upward, with Target, Kohl's (KSS, Financial) and Walmart trading much higher by Thursday close.
Shares of Target jumped more than 5% Thursday. Other retail stocks also were trading higher on the news. Walmart gained 1.5%, Kohl's was up 4.8%, and Macy's (M, Financial) climbed more than 5%, reported CNBC.
Despite the improved fortunes during the first two months of the current quarter, Target left its fiscal 2017 guidance of low single-digit decline in comparable sales untouched, and the company should be updating it when it releases second-quarter earnings numbers on Aug. 16.
“Target’s recent progress reinforces our confidence and commitment to our strategy as we build an even better Target for tomorrow. Following better-than-expected results in the first quarter, we’ve seen additional, broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment,” said Brian Cornell, chairman and CEO of Target.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
