Target Corp.’s (NYSE:TGT) efforts to revamp its business showed signs of success in its latest quarter. Target reported a profit of $672 million, or $1.22 a share, compared with $680 million, or $1.16 a share, a year earlier. On an adjusted basis, the company earned $1.23 a share, the same as a year ago. According to a poll by Thomson Reuters, analysts had expected adjusted earnings of $1.19 a share. In February, Target posted profit and sales declines and issued a profit warning.
The results were driven by increased digital sales and a modest gain in foot traffic. Target posted a 1.3 percent rise in same-store sales in its most recent quarter, an improvement from a 1.1 percent decline a year ago. It was the first time store sales rose in a year.
Comparable digital sales increased 32 percent in the quarter, up from 16 percent in the same period last year. Sales also increased in other categories, including essentials and hardlines, while food and beverage sales were flat.
Target Chief Executive Brian Cornell said on a call with analysts, “We saw a meaningful increase in the percent of our business done at regular price and a meaningful decline in the percent on promotion. This demonstrates the progress we’ve already made and gives us confidence we’re on the right track.”
The Minneapolis-based retailer expects similar same-store sales growth in the second half of its fiscal year. It expects its third-quarter adjusted profit to be 75 to 95 cents a share. The company has also raised its fiscal year outlook. Target now expects an adjusted profit of $4.34 to $4.54 a share. That is higher than its previous forecast of $3.80 to $4.20 a share in profit.
The results helped shares rise 4.9 percent in premarket trading Wednesday. The stock has fallen nearly 25 percent so far this year.
Cornell said the company is going ahead with major changes to “build an even better Target that will thrive in this new era of retail.” The retailer has launched a three-year, $7 billion plan to revamp its interiors and reduce prices.
The pressure has increased on Target to improve its grocery business. Amazon’s plan to purchase Whole Foods Market Inc. has rocked the grocery industry. Target is planning to remodel more than 100 existing stores this year, double its number of small-format stores and expand its next-day delivery service for online orders.
Earlier this week, Target announced that is testing a same-day delivery program in New York. It is also piloting a program that lets customers fill a box with home items for a flat fee. The company recently announced plans to buy logistics-software company, Grand Junction, to give it more options for delivering online orders.