Target’s Q2 Growth Boosted by Fashion and Beauty

This story has been updated.

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Target Corp . saw a sales uptick in the second quarter — and the company’s share price is following suit.

For the three months ending June 30, total revenues of $25.5 billion were up 2.7 percent over last year, and beat Wall Street expectations for $25.2 billion.

Net income was $1.19 billion, versus $835 million. Adjusted earnings per share of $2.57 marked a 40 percent increase year-over-year. Wall Street had previously estimated $2.18.

On Wednesday, Target ’s stock price closed up 11.2 percent to $159.25. Its shares were in contrast to those of Macy’s Inc., which saw its shares fall 12.9 percent after the retailer cut its forecast for the year.

The company is still maintaining its guidance, albeit cautiously. “Our experience over the last several years has shown us that a prudent outlook while maintaining the team’s agility is the best way to position our business,” said Michael Fiddelke, chief financial officer and executive vice president of Target, on a call with analysts Wednesday. “While our full-year comp guidance range remains the same at 0 percent to 2 percent growth and the breadth of possibilities remain quite wide, our baseline plan for the physical season would put us in the lower half of that range for the full year.”

Conversely, the retailer raised its guidance on adjusted earnings per share for the full year, expecting $9 to $9.70 versus the prior estimate of $8.60 to $9.60.

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Much of that included returned growth in discretionary categories, such as fashion and beauty. “We saw notable areas of strength in both discretionary and frequency categories,” said Rick Gomez, Target’s recently promoted chief commercial officer, on the call. “Women’s apparel saw growth in the low- to midsingle-digits with particular strength in our young contemporary owned brand Wild Fable.”

All in Motion and sleepwear brand Auden also got call-outs for their performance.

Apparel, for example, saw comparable sales grow 3 percent in the quarter, while beauty notched high-single-digit gains.

“Beauty continues to gain meaningful market share with comp growth in the high-single digits in the second quarter driven by a balanced combination of new offerings, celebrity brands and seasonal relevance,” said Gomez, noting that SPF performed well at lower price points like Up & Up, and on the prestige end with Vacation.

As reported, Target also recently launched Blake Brown, the hair care brand founded by Blake Lively, this month.

“We are hopeful that this is the beginning of more consistent performance and discretionary trends can continue to be positive,” said Oliver Chen, an analyst at TD Cowen, in a note. “The second quarter is the first time apparel has comped positive since fiscal 2021, and this category is competitive. Consumer does have spending power underpinned by a still-tight labor market, but we believe spend decisions remain considered.”

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