Is Target’s Turnaround Actually Real? | Fast Five Shorts

According to the Wall Street Journal, Target raised its full year sales and earnings forecast for the second time this year with fiscal second quarter comparable sales up 3.8%, which was well ahead of Wall Street's 2 1/2% estimate.

The sales growth was powered by a 3.6% rise in traffic and an 8.7% jump in digital comparable sales as shoppers, I should say, opted for same day Delivery.

Target's fiscal second quarter results also included a $752 million boost to net earnings, or $1.65 per share from tariff refunds.

And the company hiked its full fiscal year outlook due to both stronger sales trends and the one time boost to its bottom line.

CEO Michael Fidelke told reporters we're encouraged by the progress made so far and we're also clear eyed about the important work still ahead, end quote, while still cautioning that we quote, have much more work to do, end quote.

Joe, Target coming off back to back strong quarters and it just raised guidance for the second time this year in dissecting Target's results.

What should the retailer be encouraged about and where indeed is there still more work to do?

As CEO Michael Fidelke alludes to, I.

Think there's a few really good signs in Target's numbers above and beyond the tariff refund which has kind of helped a whole bunch of retailers out this this past quarter and it kind of can't really count it towards long term growth prospects.

But you made the point about same day Chris.

25% Growth in same day delivery for Target kind of says that, you know those, those everyday essentials that people really need.

People are turning to Target more and more on the E commerce front.

Their store comps not as good as their digital comps but still up 2.7%.

So still up more than Wall street was expecting which kind of suggests that some of the hard work that Target has been doing to make stores more inviting to improve the way that they're merch may be starting to pay off in a small incremental way.

But I, I'd say that's probably where Target knows it still has some work to do.

They've already made great progress as far as the the center store grocery part of the business, the fun one to one part of the business games seems to be a standout for them this quarter and and I think there's exciting things to come around beauty as they kind of swap out Ulta and start building their own thing.

But I think that that'll be a big piece of work ahead of Them is continuing to make the beauty offering really attractive to those shoppers.

Yeah, 100%.

Yeah.

Joe, I, this is an interesting one for me.

I think on the positive side you first of all, you got to give Target credit for the trend line.

The trend line is strong.

The two year stack was positive.

If you look at last year's, last year's Q2, they were down 1.9%.

So net net they're positive growth over two years.

So that, so that's, that's really good.

There are a few negatives though that I would call out, one of which is one you mentioned which is digital is still slow to me at 8.7%.

That's still a, that's still a slow marker of growth.

Especially when you're also touting a 30% increase in same day and next day.

I find the inclusion of and next day interesting in that statistic because while that 30% might sound big, it might actually be too slow if you look at the same day growth in comparison to Walmart and Target.

So digital to me should be growing faster than it is.

The other point I bring up too is, you know, how sustainable is this growth pattern that they're seeing?

You've talked about it, Joe.

They've talked about it.

They've talked about the merchandising changes, they've talked about the new in store assortments.

Well, with new in store assortments comes better inventory position because your inventory is coming in up front.

We know the in stocks have been bad.

So how much of that comp growth is just to having inventory in a way that you didn't have before?

And will you, will you be able to sustain that and grow it year over year?

Which brings me to my last point, Joe, which I'm still a little bit negative on their strategy.

It just felt, I read through their earnings report.

It just feels like generic category repositionings are their strategy, which I've been saying over and over again isn't enough.

Target needs another hook, something new, something inventive, something bold.

And I'm just not seeing it in how they're talking about the business.

But I don't know.

Joe, what do you think?

I agree with pretty much everything you just said, Chris.

I think Target's definitely still got a lot of challenges ahead of it.

I think Target has said at the C suite level a lot of good things about what it needs to do.

I think it knows what it needs to do.

But I think we'll continue to have to wait and see how that translates down to the level of individual stores.

I think there are some positive signs like you said, but they definitely not in position of resting on their laurels yet.

And that question of, you know, kind of needing something special, something really differentiated, I think that's a challenge that all retail faces these days, right when, when people could just sit on their couch and scroll social media, what gets them off their couch and going into stores?

And I think, you know, another way of phrasing what you were talking about is like I think Target people go to Target these days because they have to.

And I think Target wants people to go to Target because they want to.

And that, that shift from a, have to, have to visit store to pick up stuff, that's a chore to, to the want to visit store to see what's new in the assortment, what's exciting, what, what, what, what isn't somebody planning to buy when they go.

That's, that's, that's what we'll have to keep an eye on for the next couple of quarterly earnings from them.

Yeah, absolutely.

And I know too that their SVP of food and beverage, John Collins, going to be at Grocery Shop too.

And I'm looking forward to meeting him.

He's an old colleague, old friend of mine.

And yeah, they've been taking a definitive approach in grocery particularly to add newness, add items that you wouldn't find and you know, your average run of the mill supermarket.

And so we'll see if that pays off here in the long run to continue to drive traffic.

But the store side numbers, I will say this, everyone, as hard as I've been on Target, the store side numbers are encouraging.

It's just a question of can they keep it up and do they have the strategy in the long term to be sustainable.