Target CEO Brian Cornell has said that this is the best consumer environment he has ever seen in his career.
Cornell made the remark after big-box retailer Target reported its best comparable-sales growth in 13 years and said a strong economy lifted customer visits to the most in a decade.
Shares hit a record high as Wall Street absorbed the news and the company’s second quarter report.
Cornell told analysts, “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.”
For the second quarter, Target beat on earnings, revenue, and comparable store sales. Digital sales also jumped over 40%. Second-quarter same-store sales rose 4.9 percent, beating expectations of a 3.99 percent increase, according to Thomson Reuters I/B/E/S. Excluding one-time items, Target earned $1.47 per share in the quarter, also beating the average analyst estimate of $1.40. Revenue climbed to $17.78 billion, ahead of the average estimate of $17.31 billion.
For the full year, Target has also raised its earnings forecast to a range of $5.30 to $5.50 per share. Previously the retailer had forecast $5.15 to $5.45.
Cornell said, “We are really pleased with the second quarter financial results. Comparable sales grew 6.5% in the quarter, representing Target’s stronger quarterly comp performance since 2005. This increase was driven by traffic growth of more than 6% an unprecedented number and by far the strongest performance, since we began reporting this metric in 2008.”
“I think what you’re seeing right now from a macro basis is well-run retailers with strong balance sheets that generate cash … are winning right now,” He also remarked. “And there’s obviously others right now that can’t afford to invest in their store experience, or build capabilities or drive differentiation. And they’re giving up share. So there’s clearly winners and losers. We certainly think we’re migrating to the winners column.”
Cornell told CNBC’s Squawk Box, “We’re seeing a great consumer response … unprecedented traffic. As we go back and look, we’ve never seen traffic growth like this.”
When asked about Amazon and Walmart, Cornell said in an on-air CNBC interview: “I think of them every single day. And we measure ourselves against their performance. So we are fighting for those trips, we’re fighting for those footsteps, we’re fighting for the clicks, and right now I think we are starting to build momentum.”
Quo Vadis Capital President John Zolidis said that Target is “building an answer to Amazon.”
“Target is well along the path to transforming its business model and consumer offer and positioning itself to take share over the long-term. The Street has not come around to this view, thus making the stock exceptionally interesting, in our opinion,” Zolidis added.
“The consumer is the strongest since ’99,” remarked Jefferies analyst Randal Konik. “Companies are managing inventories very well, digital investments are paying off, real estate is being rationalized … [Christmas] will be much better than people think.”