Target Investors to Focus on Investment Gains -- Earnings Preview

Target Corp. is scheduled to report fiscal second-quarter results before the market opens on Wednesday. Here's what you need to know:

EARNINGS FORECAST: Analysts polled by FactSet expect adjusted earnings of $1.19 a share, compared with $1.07 a share a year earlier.

REVENUE FORECAST: Target is expected to report revenue of $16.25 billion, roughly flat from $16.17 billion a year ago.

WHAT TO WATCH:

STORE TRAFFIC: Target raised its sales outlook last month, saying it now expects an uptick in foot traffic to provide a modest increase in sales at its stores open at least a year. Several other retailers, including Macy's Inc. and Kohl's Corp., have reported improved traffic in the summer months, but investors will be looking to see whether Target's investments in its stores and house brands are resulting in market-share gains.

GROCERIES: Amazon.com Inc.'s deal to buy Whole Foods Market Inc. puts renewed focus on Target's grocery business, which has had declining sales despite efforts to improve the assortment of foods it sells. Last year, Target was in advanced talks to acquire Sprouts Farmers Market Inc., a Phoenix-based chain of about 250 grocery stores, but it eventually walked away from the deal. On Monday, Target said it has hired executives from Wal-Mart Stores Inc. and General Mills Inc. to accelerate its food-and-beverage strategy, after naming Kroger Co. veteran Jeff Burt to lead the division earlier this year.

E-COMMERCE INVESTMENTS: Target has worked on its e-commerce capabilities, particularly as competition with Amazon and Wal-Mart continues to heat up online. It has revamped some digital projects and cut ties with partners in favor of developing its own programs. On Monday, the company said it is working on a test for same-day delivery and will acquire logistics software company, Grand Junction, potentially giving Target more ways to deliver online orders.

ONLINE MARGINS: The shift to e-commerce often comes at higher costs for brick-and-mortar retailers like Target as they adjust to shipping, customer-acquisition and technology expenses. Target investors are looking to see whether the company can grow its online sales profitably, unlike many online upstarts that operate at a loss. Target has been testing a service in which customers could fill a box with merchandise, then receive it within two days for flat fee, and earlier this year it increased its free shipping minimum on web orders to $35 from $25. Both changes are aimed at improving online margins by encouraging customers to place bigger orders.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com

(END) Dow Jones Newswires

August 15, 2017 06:14 ET (10:14 GMT)