Uber retailer Target Corporation (NYSE:TGT) released earnings this morning, and the results were quite surprising, to the upside.
Many didn’t expect that new (as of August of last year) CEO Brian Cornell could turn around the third-place retailer in the U.S. this quickly.
It’s certainly not for lack of trying. Cornell has moved aggressively into the e-commerce space where Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores, Inc. (NYSE:WMT) were eating its lunch. And that meant getting customers to actually trust Target with their financial details again after the massive security breach in 2013.
He streamlined the bureaucratic harrumphing that was turning its ‘cheap chic’ image into tired togs, and he moved more aggressively into the healthcare space that had been the dominion of WMT.
He shut down TGT operations in Canada, where Target had racked up $2 billion in losses.
Less than a year later Cornell is getting it done. And it’s paying off faster than anticipated. Earnings for the quarter came in at $1.10 a share. Analysts were predicting $1.02. Revenue increased 2.8%. Same-store sales were up 2.3%, meeting expectations. The number of transactions and the value of those transactions each increased.
And Target raised guidance for the rest of the year.
What’s more, there are still segments of the business that have yet to really hit their strides. TGT is revamping its grocery selection and adding more fresh foods and organic items. This is a new initiative that should see its first results in coming quarters.
TGT also is moving into e-commerce in a big way. Target saw a 38% boost in online sales in Q1. Granted that’s a 38% boost from very little, but you get the point. TGT is just getting started online.
Target’s launch of a Lilly Pulitzer line took TGT stores and its e-store by storm, and it’s likely that it was TGT stock’s first but last foray into the fashion space with highly sought after name brands.
It can be a significant challenge to make a company with a nearly $50 billion market cap agile and dynamic, but it looks like Cornell has found a way at TGT.
What’s more, Target stock kicks off a nice 2.65% dividend yield. That’s a nice sum given the inherent growth potential TGT stock has.
Certainly it isn’t clear sailing for TGT from here, but the point is, Cornell has set out a number of initiatives and in each case his changes have begun to make a positive difference. If Target can continue to build off this momentum, then TGT’s future will be very bright indeed. But that takes more than one solid quarter.
Expectations were low for a reason. Now that Target has raised guidance for 2015, the bar has been set a bit higher. Let’s see how TGT does in coming quarters.
That said, Target is still worth a buy here, and we’ll pocket the dividend as we wait.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
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