Sales surpassed expectations
Target (TGT) reported total revenue of $17.8 billion in the fiscal second quarter, which exceeded analysts’ expectation of $17.3 billion and increased by 6.9% on a YoY (year-over-year) basis. The company’s healthy top-line growth came on the back of impressive comps, which increased by 6.5%, the highest growth in the past 13 years.
Comps were led by exceptional growth in traffic, which was up 6.4% during the second quarter, the strongest growth the company has ever reported.
The improving macro backdrop, the expansion of convenient fulfillment options, and a focus on merchandising and value pricing are drawing customers to the big box retailers and driving their sales despite heightened competition from Amazon (AMZN).
Besides Target, Walmart (WMT) also reported exceptional growth in its comps during the last reported quarter. Meanwhile, analysts expect Costco (COST) to also report solid comps growth in its upcoming quarter.
Multiple catalysts for sales
Target has taken several strategic initiatives that are accelerating its top-line growth rate. The company’s booming digital business has been a key contributor to its comps growth rate. During the reported quarter, Target’s digital channel sales added 1.5% to the comps growth.
Plus, the company’s exclusive brand launches have been popular with customers, as these brands are generating a healthy sales growth rate and driving the top-line growth. Also, acceleration in the pace of store remodeling, the opening of small-format stores, and value pricing continue to support its top line.
Management remains upbeat and expects third-quarter and fiscal 2018 comps to grow in line with the growth it delivered in the first half. During the first half of fiscal 2018, Target’s comps increased by 4.8%.