Target (NYSE: TGT) impressed this week when it reported its second-quarter results. Shares shot up after the report was released and finished the week up about 5% since the results were posted on Wednesday. The quarter highlighted solid execution and a healthy consumer environment as revenue increased 6.9% year over year and customer traffic rose 6.4% -- the strongest growth in that key metric since the company started reporting it in 2008.
But there's more to the quarter than these headlines. With a number of initiatives underway to shake things up, including remodels, the rollout of small-format stores, and the ongoing integration of its Shipt acquisition late last year, Target's earnings call included a lot of information for investors to mull over.
Continue Reading Below
Here are some key quotes from the call (via an S&P Global Market Intelligence transcript).
Remodeled stores are driving outsize growth
One way Target is attempting to better position itself for growth is by remodeling its stores in a way that maximizes both the customer experience and Target's growing fulfillment initiatives. The ambitious undertaking includes a goal to remodel over 300 stores this year. Fortunately, management said it's on track with its plan, completing 113 remodels in the second quarter alone. Furthermore, management noted that at one point during July, Target had 258 locations that were being remodeled -- "the highest at any time in our history," said COO John Mulligan about the initiative.
But how are these remodeled stores performing? Early data looks very promising, according to Mulligan:
Target's small-format stores are a success
Another way Target is attempting to boost its business productivity is by launching more of its new small-format stores, which are proving to be more efficient operations than the company's traditional stores.
Target opened six of these new stores in both Q1 and Q2.
Shipt is growing rapidly
Finally, there's Target's late 2017 acquisition of leading same-day delivery platform Shipt -- a move the company made to boost its fulfillment capabilities. Shipt, which continues to serve customers other than Target, is seeing very strong growth, Mulligan said.
Target's store remodels, small-format stores, and its fast-growing same-day delivery service show how the company is investing aggressively in growth areas, building a good case for Target's strong growth to persist. Management is clearly expecting its momentum to continue, as Target guided for comparable sales growth to rise 4.8% in the second half of the year, in line with the strong growth Target delivered in the first half of the year.
10 stocks we like better than TargetWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Target wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018