Target crushes revenue forecast as stimulus drives sales

Target Corp. (TGT) – Get a report on Wednesday released much higher than expected first quarter results, and said profit margins are likely to improve over the remainder of the year as large retailers continue to dominate the market as the country exits the coronavirus pandemic and that buyers are being fueled by trillions of government stimulus packages.

Target said adjusted profit for the three months ending in April was set at $ 3.69 per share, more than five times last year’s total and well ahead of Street’s consensus forecast of 2, $ 21 per share. The group’s revenue, Target said, rose 23.4% to $ 24.2 billion, again beating analysts’ estimates by a total of $ 21.76 billion.

Target said same-store sales grew 18%, with overall comparable sales, including digital channels, up 22.9%, well ahead of Refinitiv’s forecast of 9.9%. Comparable digital sales, Target said, were up 50% from a year ago, with online shopping continuing to generate transactions even in the final months of the pandemic.

Target said it saw “high single-digit” same-store sales growth for the current quarter, and an operating margin “well above” last year’s 7.2% rate.

“Our first quarter performance was exceptional across the board and demonstrated the power of putting our stores at the center of our strategy,” said CEO Brian Cornell. “It’s important to note that market share gains of over $ 1 billion in the first quarter, in addition to the $ 1 billion gains in stocks a year ago, demonstrate Target’s continued relevance to our customers, even though they have many more purchasing options compared to a year ago. . “

“Given the trust we have established with our clients quarter after quarter and our commitment to adapt with them to the changes taking place in the macroeconomic environment, we are confident in the continued growth of the membership in the second quarter. and during the rest of the year. , as well as a good full-year operating margin, ”he added.

Target stocks were marked 3.8% early in trading immediately after the results were released, down from 1.3% for the S&P 500, to change hands at $ 214.00 each.

Retail sales in March beat Wall Street forecasts, increasing 9.8% from a year ago to $ 619.1 billion, in part thanks to the impact of stimulus payments of $ 1,400 to most of the domestic households in the United States acted on President Joe Biden’s $ 1.9 trillion bailout.

However, April’s retail sales stagnated amid sharply rising consumer price inflation – the fastest since 2009, in fact – and the diminishing impact of stimulus measures.

“Stores continued to be the linchpin of Target’s online capacity, once again validating management’s strategic decision to position them at the center of its online flywheel, with shipping benefits. in-store, in-store and curbside, resulting in a continuous robust line. sales growth as consumers take advantage of these flexible options, ”said Moody’s Vice President Charlie O’Shea.

“The guidance for Q2 and beyond, particularly on the margin side, reflects management’s view that operating expenses can continue to be more exploited, and the mix will remain favorable, with our view as a driver. key on the revenue side will be private and exclusive brands, which drive margins, ”he added.

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