Target
Inside the Numbers
In Q1, Target reported $3.69 in earnings per share which was higher than expectations of $2.25 per share and a significant increase from last year's $0.56 per share. Revenue also beat at $24.20 billion vs. $21.81 billion. This was a 23% increase from last year's Q1. The company attributed its strong quarter to strength in its exclusive brands and curbside pickup.
Target is optimistic about its consumers' finances and the economy reopening and issued Q2 guidance above expectations. This seems to be a trend as nearly all retailers have posted strong Q1 results above expectations. Spending on home goods remains strong, while spending on clothes, makeup, and luggage have been very strong also in Q1 due stimulus payments and people starting to live more normally.
One difference between Target and these retailers is that Target's business continued to grow during the pandemic, and it's gained more market share in retail and online shopping as a result. The company's initiatives in e-commerce, store redesigns, and private brands are also paying dividends.
Target estimates that it picked up $1 billion in market share in the last 4 months in addition to $9 billion over the last years. Website traffic has increased by 17% to stores and its website with average order size increasing by 5%. The company also has expansion plans in Southern and western states.
Stock Price Outlook
Target has been one of the best-performing stocks in this bull market. It was one of the first stocks to jump higher during the initial months of the pandemic as stores were allowed to remain open. During the initial months of the pandemic, people were flush with stimulus checks but had few places to spend which benefited the company.
Later, the company was able to grow its e-commerce sales and serve more customers with same-day pickup and curbside pickup services. As a result, it is one of the fastest-growing e-commerce merchants and is third in terms of market share. Now, it's seeing gains from spending increasing in categories like clothes, luggage, makeup, etc., as people's lives slowly return to normal.
Therefore, it's not surprising that Target's stock has consistently outperformed. It's steadily made higher highs and higher lows and outperformed its peers as well. Currently, it's probably the top retail stock and has all the makings of a bull market leader that investors should buy on dips.
