Growth in “signature” categories, including home, helped Target Corp. make strides in the first quarter and beat a Wall Street earning estimate. Target’s net earnings in the period were $635 million, or 98 cents per diluted share, versus $418 million, or 66 cents per diluted share, in the year-earlier period, while adjusted diluted earnings per share from continuing operations came in at $1.10 versus 92 cents in the fiscal 2014 quarter.
A Thomson Reuters analyst average estimate pegged adjusted earnings to come in at $1.03.
Comparable sales gained 2.3% in the first quarter year over year, the company reported. E-commerce revenues increased 37.8% and contributed 0.8 percentage points to comparable sales growth, Target pointed out. Within the comp equation, number of transactions was up 0.9%, and average transaction amount was up 1.4%. Average transaction amount gained based on a 5.1% advance in selling price per unit moderated by a 3.6% decline in units per transaction.
Target’s first quarter sales increased 2.8% to $17.12 billion, the company stated. Earnings before interest expense and income taxes were $1.15 billion versus $1.02 billion in last year’s quarter.
In a conference call, Brian Cornell, Target’s chairman and CEO, said that sales picked up as the weather warmed and the company launched its Lilly Pulitzer collection, although, he said that the company would have to address problems responding to the volume of traffic it experienced online as demand for the product line peaked. He noted that first quarter sales in what the company now defines as signature categories, baby, kids, wellness and style, was a significant boost to results.
“First quarter comp sales in signature categories grew more than twice as fast as our comparable sales overall, and mix in our digital channels was even stronger. Specifically, about two thirds of our first quarter digital sales increase was driven by growth in home and apparel,” said Cornell.
In announcing the financial results, Cornell stated, “We’re pleased with our first quarter traffic and sales, particularly in our signature categories, which drove better-than-expected profitability through improved gross margin and continued expense management. We’re encouraged to see early progress on our strategic priorities, including strong sales growth in apparel, home and beauty, nearly 40% growth in digital sales, and positive traffic in both our stores and digital channels. We continue to benefit from strong execution by our stores team, who overcame weather challenges and West Coast port delays to deliver outstanding guest service in the first quarter.”