Target comp sales beat shows turnaround efforts gaining traction

Wed Feb 24, 2016 2:08pm EST
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By Sruthi Ramakrishnan

(Reuters) - Target Corp's (TGT.N: Quote) quarterly sales at established stores topped analysts' estimates as its initiatives around higher-profit items drove traffic, showing that the company's turnaround efforts under CEO Brian Cornell were gaining traction.

The U.S. retailer, whose shares rose as much as 4 percent to $76.95, also forecast a higher-than-expected adjusted profit for the full year.

Same-store sales at rival Wal-Mart Stores Inc (WMT.N: Quote) missed market expectations last week, hurt by a strong dollar and sluggish apparel demand.

Target's apparel sales rose in the fourth quarter, in contrast to weak sales at several retailers including Ralph Lauren Corp (RL.N: Quote) and Nordstrom Inc (JWN.N: Quote).

Cornell, Target's chief executive since August 2014, has been aggressively trying to turnaround the company after several years of sluggish growth.

Some of his efforts include promoting and investing in a narrower set of higher-margin "signature" categories such as baby and health and wellness, and pulling out of Canada.

Comparable sales in higher-margin categories rose by more than three times the company average in the quarter ended Jan. 30, Target said, with women's apparel, wearable electronics and food being the fastest growing.

"Signs that CEO Cornell's strategic initiatives are gaining traction include: 'signature' categories re-accelerating to about 6 percent growth and traffic rising 1.3 percent," Sterne Agee analyst Renato Basanta said.   Continued...

A shopper looks at a sales flier during Black Friday Shopping at a Target store in Chicago, Illinois, United States, in this November 27 , 2015, file photo. REUTERS/Jim Young/Files