Retail continues to separate into winners and losers. With a big earnings beat and a raised outlook, Target Corp. (TGT) looks to be widening that gap on Wednesday.
Shares of the Minneapolis-based retailer roared 15% to the upside in pre-market hours Wednesday, implying an all-time high on the open and the largest jump for the stock in over 10 years.
"We are really pleased with our second-quarter performance, which demonstrates the strength of our strategy and the durable financial model we've built over the last several years," CEO Brian Cornell said. "Traffic and sales continue to grow while our EPS reached an all-time high, driven by the strength of our team's execution and their focus on delivering for our guests."
Along with an all-time earnings high of $1.82 per share that cruised past analyst estimates, Target reported revenue that edged out expectations at $18.4 billion.
Cornell noted that investments in digital and quick deliveries were pivotal to the trajectory of earnings and helped same-store sales best an already high bar set by Wall Street in a weather-impacted quarter that stung Kohl's Corp. (KSS) .
"Cornell's doing it with terrific same-day pick-up initiatives and new store formats that were risky but now look like they are paying off," Action Alerts PLUS portfolio manager Jim Cramer commented.
Target said digital sales grew 34% in the quarter, driving about half the quarterly comparable sales leap and cementing the idea that Amazon.com Inc. (AMZN) isn't the only show in e-commerce.
"Comparable sales have grown approximately 10 percent over the last two years - the best performance in more than a decade," a company news release reads. "Same-day fulfillment services (Order Pick Up, Drive Up and Shipt) accounted for nearly 1.5 percentage points of the company's overall comparable sales growth."
On the back of the strength across the industry metrics, Cornell said Target would be increasing its full-year adjusted earnings outlook to a range of $5.90 to $6.20 per share from the prior range of $5.75 to $6.05.
The increased guidance flies in the face of concerns on apparel tariffs that were seen as a potential tamp on growth. Following suit with Walmart Inc. (WMT) , Target management indicated that the company's scale and execution have insulated it from big trade impacts, with margins actually improving despite sales, general and administrative (SG&A) expense increasing.
Analysts were impressed with the results.
"Consistent with our May upgrade, TGT's 3.4% comp is impressive and signals it is gaining share against the department store and specialty channel in apparel and home," J.P. Morgan analyst Christopher Horvers said. "On margins, the strong GM performance despite the slew of weather-driven markdown concerns highlights the company's balanced mix, strong execution, and scaling e-commerce strategies."
Horvers said the increased guidance is "a strong statement given what we've seen from others, especially in light of its apparel/electronics/potential tranche 4 tariff exposure."
A conference call to discuss the quarter and the look ahead amid uncertain macro dynamics into the close of the year was set to kick off at 8 a.m. Tune in here.