Market Overview

The Early Reaction To Target's Blowout Q2, 195% Online Sales Growth

The Early Reaction To Target's Blowout Q2, 195% Online Sales Growth

Shares of Target Corporation (NYSE: TGT) gained more than 12% Wednesday morning after reporting second-quarter results that came in well above expectations.

Q2 Recap: Target said it earned $3.38 per share versus the $1.62 consensus estimate. Same-store sales were a record high of 24.3% versus the 7% expected. Ticket comps rose 18.8% and comp traffic was up 4.6%, marking a turnaround from negative 1.5% in the first quarter.

Online sales were up 195% in the quarter, notably above the 100% growth the analyst was expecting. Same-day services (pick up in store, drive up, and Shipt) were up 273% and contributed 6% of the total comp growth.

The company gained around $5 billion worth of market share in the first half of 2020, according to BofA Securities Robert Ohmes. He maintains a Buy rating on Target's stock with a $150 price target.

See Also: Cramer On Why He Expects Big Retailers To Smash Earnings Estimates

CEO Talks Results Target's best-ever quarterly comp performance in the company's 50-year history came at the "most challenging operating environment" in recent memory, Target CEO Brian Cornell said on CNBC.

Target isn't offering financial guidance for the rest of the year but the company continues to see "strength across our entire portfolio," the CEO said. Comps did decelerate from over 30% in May to over 20% in June and July, while August is trending in the low-to-mid-teens as the major catalyst of back-to-school is understandably under pressure as an estimated 66% of all students will start the school year remotely.

"The overall momentum and growth in market share continue as we go into the third quarter," he said.

"The market share number of $5 billion, to me, is the most important number on the print," Cornell said. "And it just shows the relevance to our brand, the momentum, and the trust we are building with American consumers."

Sustainable Growth: Target's impressive growth in the second quarter looks to be sustainable as the company takes advantage of weaker retailers, especially Kohl's Corporation (NYSE: KSS) and Macy's Inc (NYSE: M), Matthew McClintock, senior consumer research analyst at Raymond James, said on CNBC's "Worldwide Exchange" prior to the earnings release.

Target has been quietly taking market share from weaker retailers over the past three years but the COVID-19 pandemic accelerated the gains.

These underperforming retailers are unlikely to be around in the future or will exist in a much smaller form, the analyst said. This implies a "substantial" opportunity for further market share gains. Apparel alone represents a $100 billion opportunity from shoppers that will have "nowhere else to go" but Target.

Latest Ratings for TGT

Aug 2020BMO CapitalMaintainsOutperform
Aug 2020Morgan StanleyMaintainsEqual-Weight
Aug 2020DA DavidsonInitiates Coverage OnBuy

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