Slash prices on milk, meat, and bread in this inflation-battered economy, and the consumer is going to notice while wandering the supermarket aisles.
That's especially the case for the deal-seeking Target (TGT) shopper.
The discount retailer shredded Wall Street profit forecasts on Wednesday, topping them by $0.39 a share on the back of renewed traffic to stores. Traffic increased by 3%, with all six departments at Target contributing to the improvement.
Target stock jumped 12% in early trading after the report.
As Target CEO Brian Cornell tells it, the retailer's comeback quarter reflects a steady dose of price cuts this summer on 5,000 daily essentials — items in which Target was losing market share to rival Walmart (WMT) for several quarters in a row.
"We feel great about the reaction that we're seeing from the consumer based on the 5,000 items where we've seen price reductions," Cornell told Yahoo Finance on a call with reporters. "It certainly contributed to traffic growth during the quarter — we expect that to continue over the balance of the year."
Cornell declined to say if more price cuts were coming.
Target stayed cautious with its full-year sales guidance as it enters the peak seasons of back-to-school and holiday shopping. But it did lift its full-year profit forecast amid the second quarter beat and improved traffic trends.
"Walmart's second quarter earnings highlighted that value and convenience are resonating with consumers. We believe Target's heightened focus on value positions it well for [market] share gains going forward including improving price gaps and several new owned brand launches focused on value and entry level price points," Bank of America analyst Robbie Ohmes said in a client note.
Read more: Best credit cards for back-to-school shopping at Target (August 2024)
The earnings rundown
Net sales: up 2.7% year over year to $25.5 billion, vs. estimates for $25.48 billion
Gross profit margin: 28.9% vs. 27% a year ago, vs. estimates for 28%
Diluted EPS: up 43% year over year to $2.57, vs. estimates for $2.18 (guidance: $1.95 to $2.35)
Comparable sales: up 2% year over year (last year it fell 5.4%; Walmart US reported a 4.2% gain in the second quarter of 2024) vs 1.07% estimate
Digital comparable sales: 1.4%
Store comparable sales: down 4.8%
What else caught our attention
Inventory was relatively unchanged from the prior year.
The company restarted stock buybacks, purchasing $155 million in the quarter. $9.5 billion remains available to repurchase under a prior authorization.
The number of transactions rose 3% in the quarter, while the average transaction amount dropped by 0.9%.
Target ended the quarter with almost $3.5 billion in cash.
Third quarter earnings per share are projected to be $2.20 to $2.40, compared to estimates of $2.24.
Comparable sales for the quarter are projected to be unchanged to up 2%.
Full-year earnings per share are projected to be $9 to $9.70 (previous: $8.60 to $9.60), compared to estimates for $9.22.
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In the Opening Bid episode below, former Target board member and Medtronic (MDT) CEO Bill George shares what Starbucks (SBUX) and Boeing (BA) must do to turn themselves around.
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