NEW YORK — Target’s comparable sales rose for the first time in a year as the grocery store’s promotions for cash-strapped shoppers began to pay off.
Sales at stores and digital channels active for the past 12 months or more rose 2% in the second quarter, ending months of declines that included a 3.7% drop in the previous quarter and a 4.4% drop in the final quarter of last year.
Transactions at the Minneapolis retailer rose 3% compared to the same period last year, with strength in all six major merchandising categories, including fashion and home goods. Online sales rose 8.7% and comparable sales in apparel rose 3% compared to a year ago, as customers embraced new store brands such as All in Motion and Wild Fable.
Target’s profit and revenue beat Wall Street expectations and the company raised its annual profit forecast, but said revenue this year could come in at the low end of its guidance, rising 2% unchanged.
Shares rose 13% before the opening bell on Wednesday.
“We’re seeing an incredibly resilient consumer in the face of high inflation,” said Target CEO Brian Cornell. “They’re looking for novelty, but they’re also shopping, looking for value.”
More than 50% of Target’s annual sales come from discretionary items like toys, fashion and electronic gadgets. That had become problematic as Americans focused on necessities like groceries after a post-pandemic surge in inflation.
To boost sales, Target said this spring that it would lowering prices on thousands of basic products, from diapers to milk.
And the company is rolling out programs to make shopping easier as it competes with Walmart and Amazon.com.
Goal announced a paid membership program in April called Target Circle 360, which offers unlimited free same-day shipping on orders over $35 and free two-day shipping on all orders. The $99 annual membership has been well-received, with more than 2 million memberships added in the second quarter.
Target has also expanded its own private labels, now boasting 45, including Figment, a collection of kitchenware launched last year.
Target earned $1.19 billion, or $2.57 per share, for the quarter, beating Wall Street expectations by a penny, according to a survey of industry analysts by FactSet. That compared with $835 million, or $1.80 per share, a year ago.
Revenue rose nearly 3% to $25.45 billion, slightly better than expected. But even as the number of transactions rose in the latest quarter, the average amount customers spent fell, underscoring how Americans remain focused on deals, company executives said.
Target now expects annual earnings per share to be between $9 and $9.70, up from its previous forecast of $8.60 to $9.60. Analysts had expected $9.23 per share, according to FactSet.