Target Profit Tops Estimates as Sales Recover Under New CEO

By Renee Dudley  

Nov. 19 (Bloomberg) -- Target topped analyst estimates for third-quarter earnings as same-store sales grew faster than expected. Bloomberg’s Julie Hyman examines the results on “In The Loop.”

Target Corp. (TGT) posted third-quarter earnings that beat analysts’ estimates after U.S. sales grew faster than the company expected and its money-losing expansion into Canada showed signs of improvement.
Earnings amounted to 54 cents a share, excluding some items, the Minneapolis-based company said today in a statement. Analysts had predicted 47 cents on average, according to data compiled by Bloomberg. U.S. comparable-store sales increased 1.2 percent in the period, which ended Nov. 1, helped by online orders. Target had projected growth of as much as 1 percent.
The results signal that the company is rebounding under new Chief Executive Officer Brian Cornell, a former PepsiCo Inc. (PEP) executive who took the reins at Target in A
ugust. He has been working to boost U.S. traffic, repair the company’s botched expansion into Canada and regain shoppers’ trust after hackers stole millions of customers’ credit-card numbers last year.
“Expectations are rising, so CEO Brian Cornell’s ability to outline a credible plan for sustainable improvement will be key,” Peter Benedict, an analyst at Robert W. Baird & Co., said in a note before the results were released.
The shares climbed 7.4 percent to $72.50 at the close in New York. The stock has gained 15 percent this year, topping the 11 percent advance of the Standard & Poor’s 500 Index. Wal-Mart Stores Inc. (WMT), meanwhile, is up 8 percent so far in 2014.

Photographer: David Paul Morris/Bloomberg

Customers shop for back to school supplies at a Target Corp. store in Colma, California.

Traffic Improvement

The latest numbers mark a turnaround from earlier this year, when Target was offering heavy discounts and still struggling to get customers into stores, said Brian Yarbrough, an analyst for Edward Jones & Co. in St. Louis. “Now they’re driving traffic,” he said.
On a media conference call, Chief Financial Officer John Mulligan said the company saw the best traffic performance in four quarters in the U.S.
Third-quarter net income rose more than 3 percent to $352 million, or 55 cents a share, from $341 million, or 54 cents, a year earlier, the company said. Revenue climbed about 2.8 percent to $17.7 billion.
Earnings will be $1.13 to $1.23 a share in the fourth quarter, excluding some costs, Target said. That compares with an estimate of $1.23.
On Aug. 12, Cornell became the first outsider ever to become CEO of Target. Over the past three decades, he’s worked for at least six different companies, including PepsiCo, Wal-Mart, Michaels Stores Inc. and Safeway Inc. (SWY)
Under Cornell, Target has been concentrating on its best categories, including apparel, home goods and toys. The major growth strategy of the chain’s previous CEO -- Gregg Steinhafel, was ousted in May -- was giving more floor space to groceries.
“We’re encouraged by the improving trend we’ve seen in our U.S. business throughout the year, and our fourth-quarter plans are designed to sustain this momentum,” Cornell said in the statement. “In Canada, we’ve made improvements to our operations, pricing and as