Can Target Succeed In The Ecommerce Game?
Target (NYSE: TGT) reported second quarter results that handily beat estimates and has thrown off the bumpy trend that some retail stocks created last week. The company has an excellent first half of the year in the books, and allowed the retailer to raise it full year guidance. Comparable store sales increased by 3.4% in the second quarter. The manner of those sales is even more encouraging, as Target succeeded in bringing more consumers into their stores. Traffic increased by 2.4%. The company noted that one day fulfillment services like "Order and pick up" were a strong part of the business. Walmart (NYSE: WMT) has a similar initiative, and I think it's very much the way of the future for brick and mortar. If you can do your shopping online, and then go pick it up, it's going to bring to the store, and increase the chance of you running in; hence the traffic growth.
What I really like about Target is how they're balancing growth in brick and mortar, as well as creating an ever progressing online presence. Like many retailers, Target has been forced to innovate and adapt to a shift in the retail industry and focused on keeping market share away from Amazon (NASDAQ: AMZN) by driving its online presence. At present it would seem that Target is adapting well to that shift. Second quarter digital sales increased by 34% on a comparable basis. To produce this type of online growth, while also driving store sales, indicates that management understands the market and is executing well.
Target's operating income increased a whopping 16.9% in the quarter to $1.32 billion. This translated to net earnings of $938 million. That represents a 17.4% increase year over year. Target's share count has been decreasing, leading to earnings on a per share basis to increase 22% to $1.82 per diluted share.
Source Fool.com
