• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Stocks

Target Hits a Bullseye With Latest Results and Shares Surge

Target is shining while the stars of many retail stocks dim.
By KEVIN CURRAN May 22, 2019 | 08:53 AM EDT
Stocks quotes in this article: TGT, WMT, COST, AMZN, JWN, JCP, KSS

Target Corp.  (TGT) is leaping ahead of many of its retail peers as it joins Walmart Inc.  (WMT) , Costco Wholesale Corp.  (COST)   and Amazon.com Inc.  (AMZN)  as formidable competitors in a sector that is dividing starkly into winners and losers.

Shares of the eighth-largest retailer in the United States jumped nearly 9% after its first-quarter earnings print hit the wires before settling in at a rise of about 7% before the opening bell Wednesday.

"This market is of one mind," Action Alerts PLUS portfolio manager Jim Cramer wrote in a column on Wednesday morning. "Endless punishment for the losers and endless praise for the winners, with the only exception being a comment from management that says the tariffs are too hard to handle."

The move in Target's stock is promoted by an uncharacteristically strong report for a retailer, highlighted by a beat on the top and bottom lines and a 4.8% increase in same-store sales, which marked the ninth consecutive quarterly gain for the company.

"Target had an outstanding first quarter, as our team delivered a great experience for our guests and drove strong growth in traffic, comparable sales, operating income and earnings per share," CEO Brian Cornell said in a statement. "Target's first-quarter performance and market-share gains demonstrate that the model is working."

The model of the company has clearly set it apart from higher-priced peers such as Nordstrom Inc.  (JWN) , which lamented its struggling business, and key discount competitors Kohl's Corp.  (KSS) and J.C. Penney Co.  (JCP) .

Analysts noted that much like the other retailers that have done well this earnings season, convenient e-commerce options were a driver of Target's earnings result.

"TGT's investments are driving market-share gains and same-day fulfillment services (Order Pick Up, Drive Up and Shipt) drove well over half of the Company's digital sales growth," KeyBanc Capital Markets analyst Edward Yruma said, noting "continued momentum" for the retail sector stalwart.

Target's Cornell noted that he expects this trend to continue to drive earnings as the year progresses as he reaffirmed the company's prior guidance.

"Throughout this year, we will continue to extend the reach of our same-day fulfillment options, strengthen our portfolio of owned and exclusive brands, remodel and open more stores and invest in our team," he said. "We're confident that we're well-positioned to deliver strong financial performance in 2019 and beyond."

To be sure, Target likely will deal with issues that include a race to the bottom that could squeeze already-tight margins at Target.

Target's convenience and e-commerce effort have been blamed for margin erosion in recent quarters due to the cost of implementing and executing such initiatives.

"First-quarter gross margin rate was 29.6%, compared with 29.8% in 2018, reflecting higher digital fulfillment and supply chain costs, partially offset by the benefit of merchandising strategies," the company noted in an SEC filing.

The margin erosion has been central to the bear theses on Target stock in recent quarters and could be amplified by cost cutting by lagging competitors that are eager to regain customers.

"Dept. store peers that reported this week seem to have carried inventory into the spring and also indicated plans to be more aggressive on pricing/ promos," Credit Suisse analyst Seth Sigman warned.

Still, Sigman said the dynamic in the retail sector has shifted "and Target has shown an ability to tread higher whilst peers plummet."

"While this does add some risk to TGT's Q2 GM, the company has been out-comping (home+apparel categories) department store/ off-price peers, helped by the strength of its private brands which should position TGT strongly," he concluded.

Sigman set an "Outperform" rating on the stock with an $85 price target, which would suggest a recovery back to the stock's mid-April highs.

An earnings conference call in which management will seek to sustain the market optimism is underway. Click here to tune in.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities.

TAGS: Earnings | Investing | Stocks | Value Investing | Consumer | Retail | Technology | E-Commerce | Analyst Actions | Stock of the Day

More from Stocks

Not Even the Mega-Cap Tech Stocks Could Hide From the Selling

James "Rev Shark" DePorre
Oct 3, 2023 4:37 PM EDT

Like or not, this is classic bear market action playing out.

Costco: Are We Witnessing a Bull Trap?

Bruce Kamich
Oct 3, 2023 1:08 PM EDT

When one of the last holdouts of the S&P 500 turns down the selloff is in full gear.

Chasing Alpha With Alphabet

Ed Ponsi
Oct 3, 2023 12:35 PM EDT

I'm not the only one who likes the tech behemoth. Bill Ackman believes Alphabet will be a leader in AI for years to come.

Looking for Capitulation? Don't Be Fooled by Minor Market Bounces

James "Rev Shark" DePorre
Oct 3, 2023 11:45 AM EDT

The market is trying to discount the impact of higher rates, but it's extremely difficult.

The Trickiest Stock in the Market

Stephen Guilfoyle
Oct 3, 2023 11:15 AM EDT

There's a lot to like about this name, but a lot that also sows the seeds of caution.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:13 PM EDT BRUCE KAMICH

    8 Trading Rules from T. T. Hoyne

    You just read the header for this missive and prob...
  • 08:42 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How Elite Traders Make Big Profits
  • 02:58 PM EDT BRUCE KAMICH

    Classic Trading Rules From Bernard Baruch

    Bernard Baruch listed the rules (below) in his aut...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login