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Target hits Q2 comps bullseye, store footfall “unprecedented”, online leaps 40%, kidswear rockets

Celebrations at Target Corp. The US value retail giant said Wednesday Q2 same-store sales rose at the fastest rate in 13 years. It cited continuing improvements in its stores and digital offer. A booming economy also helped. Oh, and it also gained market share in the apparel category with babywear sales also ballooning.

After across-the-board results beat expectations the retailer also raised its full-year earnings outlook, so it was little surprise its shares ended the day up over 3%.

Comparable sales grew 6.5% in the quarter ended August 4, representing Target’s strongest quarterly performance since 2005.

Total revenue also climbed 6.9% to $17.78bn, higher than the $17.3bn analysts had expected. Noteably, online sales jumped 41% in the quarter, way ahead of the 28% gain in Q1 and the 32% rise of a year ago.

Chief executive Brian Cornell said the jump in customer traffic during the quarter was “unprecedented”. Store traffic grew 6.4% from a 2.1% gain during the same period a year earlier.

Q2 profits also rose 19% to $799m. Excluding one-time items, Target earned $1.47 per share in the quarter, higher than analysts’ estimate of $1.40.

Margins remained under pressure from investments in e-commerce, inching down to 30.3% from 30.4% a year ago.

Cornell said the strong results reflected more than just a favourable retail environment, pointing to market-share gains across a range of categories from electronics and homewares to toys and apparel. There was also a strong rebound in seasonal merchandise.

“Our progress so far has been well ahead of our original expectations,” he said on a conference call Wednesday.

Strong spending during the Back-to-School shopping season and a one-day sale in July designed to compete with Amazon’s Prime Day, also boosted performance.

“There’s no doubt that like others, we’re currently benefiting from a very strong consumer environment, perhaps the strongest I’ve seen in my career,” he said.

Target has also been helped by the collapse of weaker competitors in the past year, including Toys R Us and department store operator Bon Ton Store. That reflects in that fact that Target’s sales of baby clothing and footwear shot up nearly 20% in the most recent quarter.

“Given the strong affinity [among] families with young children for our brands, toys and baby are key categories for us,” Mark Tritton, Target’s chief merchandising officer, said in an earnings call with analysts.

But Target isn’t sitting on its laurels. The retailer plans to spend $3bn this year on its supply chain, online delivery, its own brands and merging online and in-store shopping. The retailer intends to reinvest more than $7bn through 2020.

For the full year, Target raised its earnings forecast to range $5.30-$5.50 per share from $5.15-$5.45.

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