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Target’s Shares Rise After Solid Earnings Beat Expectations

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Target’s Shares Rise After Solid Earnings Beat Expectations

Target’s Corporation (NYSE:TGT)’s second quarter earnings have beat expectations. This underscores the frictionless flow of events at the big wig retailer.

While its profits remain the same, at $704 million on a year-over-year basis, the retailer managed to record an increase in earnings per share from the $1.03 last year, to the current $1.06. This means that there was more outstanding stock last year, implying that there have been many buys into the company since then.

Shares were up Wednesday morning by 1.8 percent, to settle at $64.51.

Despite the improvement in performance, Target still exhibits some major challenges. For instance, the retail heavyweight has been compelled to place profound effort in luring shoppers, at a time when consumers are still teetering in the wave of an unpredictable economy.

So, which strategies helped Target?

The retailer took a bet on the great variation exhibited by its consumers with regard to food selection. As such, it improved its selection. Currently, Target’s shelves have an increasingly varied selection of food and as such attract a lot of shoppers. In addition to that, through a program launched in 2010, Target extends a five percent discount to shoppers who opt for Target Corporation (NYSE:TGT)-branded debit and credit cards.

Expansion through brick and mortar has also been instrumental in improving Target’s bottom line. The retailer has ventured into urban markets through smaller fashions of the conventional big-box stores. It actually has three outlets in Seattle, Los Angeles, and Chicago, which according to the company are doing remarkably well.

The Minneapolis based retailer joins a fold of other retailers like The Home Depot, Inc. (NYSE:HD), The TJX Companies, Inc. (NYSE:TJX), and  Macy’s, Inc. (NYSE:M) who have capitalized on increased spending following their special offers and persuasive marketing.

A boost for the economy

The increase in Target’s profits alongside other retailers not only lights up a smile on shareholders faces, but also restores hope in the economy. Retailers have long been struggling with suppressed consumer spending. Therefore, this surge in spending could spell well for retailers and the economy as a whole. In fact, July has recorded the highest retail spending in the American space for the last five months; this is according to a government sales report that was released yesterday.

While unemployment still lurks at 8.3 percent, the month of July has added 163000 jobs- an unprecedented achievement since the month of February. In addition to that, the housing market, albeit shaky, has shown some subtle signs of recovery.

Increased retail sales coupled with an additional 163,000 jobs in July spells a lot of hope for the economy, and Americans can now rest easy knowing that things have begun taking the right shape.

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Sheeraz Raza

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