Target Hits Bullseye with Strong Q2 Results

What’s happening: Shares of Target Corp. jumped around 13% on Wednesday after the retailer crushed the consensus estimates for the second quarter.

What happened: With customers avoiding physical stores amid the pandemic, Target saw a massive spike in digital sales and curbside pickup during the quarter.

The retailer, which had witnessed increased demand in the previous quarter due to coronavirus-led lockdown, continued its positive momentum into the second quarter despite the easing of restrictions.

How were the results: The Minneapolis-based retailer reported robust growth in both sales and earnings for the second quarter.

• Revenues climbed to $22.98 billion, from $18.42 billion in the same quarter last year, significantly beating the consensus view of $19.97 billion.
• Net income surged to $1.69 billion, or $3.35 per share, up from $938 million, or $1.82 per share, in the year-ago quarter.
• Adjusted earnings climbed to a record high of $3.38 per share, far ahead of the market expectations of $1.63 per share.

Why it matters: Investors had been concerned about Target witnessing a slowdown in demand as rival stores gradually reopened and shoppers finished spending their coronavirus aid checks issued by government.

Neither of these developments stopped shoppers from visiting Target, both online and physical stores, and filling up their carts.

The company’s comparable store sales grew at the fastest rate in its 58-year history, climbing 24% last quarter, handsomely beating the consensus estimate of an 8.6%. While the number of transactions rose 4.6%, the average transaction amount jumped 18.8% in the second quarter.

Comparable digital sales surged by a whopping 195%, with the retailer’s curb-side pickup service booming, up more than 700% from the year-ago quarter. Target also gained approximately 10 million new digital customers during the first half of the year.

CEO Brian Cornell said in a statement that the company had booked market share gains of $5 billion in the first six months of the year. Despite the phenomenal performance, management pulled their projections for the rest of the year citing covid-19 uncertainty.

How shares performed so far: Shares of Target climbed 12.7% to close at $154.22 on Wednesday, after hitting a record high of $154.69 intraday. The retailer’s shares have gained more than 24% over the past three months.

What to watch: With the retailer reporting record sales growth despite easing restrictions, investors expect the positive momentum to continue in the coming quarters. The growth rate may, however, not be as high as in the second quarter.

European stocks will be in focus today, ahead of construction output report from the Eurozone.

Context: European stocks closed higher on Wednesday, a day after the S&P 500 index hit a record high.

Details: The S&P 500 closed trading on Tuesday at a record level of 3,389.78, surpassing February’s highs. The index also recovered at the fastest rate on record from a bear market. The Nasdaq 100 also notched its 34th record close for the year.

UK’s inflation rate surprisingly improved to 1% in July, higher than the 0.6% figure projected by analysts.

Shares of AP Moeller-Maersk gained 5% on Wednesday, after the company reported upbeat second-quarter earnings and reinstated its full-year projections. Royal Unibrew’s shares climbed 8%, after the Danish firm lifted its forecast following a strong performance in June.

The pan-European Stoxx 600 index gained 0.7%, with banking stocks leading the surge. Retail and utilities stocks bucked the trend and declined on Wednesday. London’s FTSE 100 index gained 0.6%, while the DAX 30 index closed higher by 0.7%.

What to watch: Investors await the Eurozone’s construction output data and the ECB’s monetary policy meeting. Construction output in the Eurozone dropped 11.9% in May, versus a revised 31% decline in the prior month.

Markets will continue to access the covid-19 numbers, with total cases rising past 22.3 million globally.

Other Markets: US indices trading closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.31%, 0.44% and 0.57%, respectively.

Germany’s producer prices, UK’s CBI industrial trends orders, Turkey’s total motor vehicles production, gross foreign exchange reserves and Central Bank of Turkey’s interest rate decision, Canada’s ADP employment change, Russia's jobless rate, retail trade and gross domestic product, Argentina’s economic activity index as well as the US initial jobless claims, Philadelphia Fed manufacturing index and EIA’s natural gas stockpiles.