Target's New Pricing Helps End Sales Skid -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 17, 2017).

Target Corp.'s efforts to cut prices and improve its digital operations showed signs of success in its latest quarter, as store sales rose for the first time in a year and the retailer raised its profit forecast.

Sales at stores open at least a year rose 1.3%, driven by stronger-than-expected foot traffic and an increase in online sales. The average amount customers spent fell 0.7%, another effect of the lower prices.

In a call with analysts Wednesday, Target Chief Executive Brian Cornell attributed the improved results to the company's lower prices, which helped it cut down on discounts.

"We saw a meaningful increase in the percent of our business done at regular price and a meaningful decline in the percent on promotion," he said. "This demonstrates the progress we've already made and gives us confidence we're on the right track."

Target has been struggling to compete with Amazon.com Inc., which is benefiting from the movement of consumer shopping online, as well as Wal-Mart Stores Inc., which has been remodeling its brick-and-mortar stores and lowering prices. In February, after Target posted profit and sales declines and issued a profit warning, it said it would invest billions to improve stores, launch exclusive brands and cut prices.

Target shares, which are down 23% so far this year, rose 2% in morning trading.

GlobalData Retail analyst Neil Saunders applauded the results, saying in a research note that "after a long run of decline, green shoots are finally showing at Target." The uptick in store sales, he said, "suggests that some of Target's initiatives are starting to pay dividends."

Comparable digital sales increased 32% in the quarter, up from 16% growth in the same period last year. Food and beverage sales were flat, while sales increased in other categories, including essentials and hardlines.

Target plans to double its number of small-format stores this year, remodel more than 100 existing stores and expand a next-day delivery service for online orders. On Monday, it said it was buying a logistics startup, Grand Junction, to help it expand its same-day delivery offering for in-store purchases.

Mr. Cornell said that Target is also launching four more house brands this quarter, part of its plan to launch 12 by the end of next year.

Amazon's deal to buy Whole Foods Market Inc. has put renewed focus on Target's grocery business, which has had declining food sales despite efforts to improve the assortment it sells. On Monday, Target said it has hired executives from Wal-Mart and General Mills Inc. to accelerate its grocery strategy.

The company said it now expects full-year profit of $4.34 to $4.54 a share, up from its previous forecast of $3.80 to $4.20 a share. It expects its same-store sales growth in the second half of its fiscal year to be roughly the same as the first half.

Overall, Target reported second-quarter profit of $672 million, or $1.22 a share, compared with $680 million, or $1.16 a share, a year earlier. Revenue rose 1.6% to $16.43 billion from $16.17 billion.

Cara Lombardo contributed to this article.

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

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August 17, 2017 02:47 ET (06:47 GMT)