Target’s Solid Q1 Performance Boosts Its Stock

TGT rises 7.8%

Target (TGT) closed 7.8% higher on May 22 following the company’s better-than-expected performance in the first quarter. Target surpassed analysts’ expectations on the sales and earnings front for the first quarter, which ended on May 4.

Stellar traffic growth both in-store and online drove its comparable sales, and in turn, its net sales, which came in ahead of analysts’ estimate. The remodeling of stores, the focus on merchandise, and fast delivery of online orders helped the company to generate higher traffic amid heightened competition.

Target’s Solid Q1 Performance Boosts Its Stock

Walmart (WMT) also impressed investors with its continued momentum in comps, driven primarily by the expansion of digital fulfillment options, expanded assortments, value pricing, and omnichannel offerings. Meanwhile, Costco’s (COST) value proposition is driving traffic, and in turn, its comps growth rate.

Target also impressed with its first-quarter margins. The company’s gross margin continued to decline, reflecting higher digital fulfillment and supply-chain costs. However, the rate of decline decelerated sequentially, reflecting a favorable merchandise mix. Moreover, operating margin expanded, reflecting cost savings.

Target’s adjusted earnings continued to grow at a double-digit rate and came in ahead of management’s and analysts’ expectation. Strong sales and operating margin supported first-quarter bottom-line growth.

Stock performance so far this year

Including yesterday’s gains, Target stock is up 17.4% so far this year and has generated better returns than the broader markets as well as Walmart stock, which is up 9.7% on a YTD basis as of May 22.

In comparison, Costco’s industry-leading comps drove its stock 22.5% higher on a YTD basis. Meanwhile, the S&P 500 Index has risen by 13.9%.