Target Corp.’s first-quarter profits rose 28.5 percent, boosted by sales of high-margin discretionary items, including apparel.
Although the economy and consumer sentiment have improved, Gregg Steinhafel, chairman, president and chief executive officer, said on a conference call Thursday that both are “somewhat unstable and fragile” because of high unemployment and large state and federal deficits that “will continue to create uncertainty and volatility. As a result, we continue to be cautious regarding our sales outlook.”
For the quarter ended May 1, Minneapolis-based Target reported net income of $671 million, compared with $522 million in the same year-ago quarter. Earnings per diluted share increased to 90 cents from 69 cents in the same period last year, the highest EPS from continuing operations in Target’s history, excluding holiday-driven fourth-quarter results.
Customers “are putting well-considered discretionary items back in their baskets,” said Kathryn Tesija, executive vice president of merchandising. “They are indulging while feeling smart in their decisions. We’re seeing this trend particularly in home and apparel. Both men and women are freshening up their casual wardrobes and picking up new shoes and accessories for spring.”
At the firm’s retail division, sales rose 5.5 percent in the quarter to $15.16 billion from $14.36 billion, reflecting a 2.8 percent increase in comparable-store sales and the contribution from new stores. Earnings before interest expense and income taxes (EBIT) were $1.11 billion, a 15.2 percent increase from $962 million in the same period last year.
The retailer’s first-quarter gross margin rate was 31.3 percent, up from 30.8 percent in 2009, because of gross margin rate improvements within categories. The impact of the sales mix on gross margin rate was essentially neutral, as sales increased at a similar pace in both higher-margin and lower-margin categories.
The first-quarter sales, general and administrative (SG&A) expense rate was 20.6 percent, down from 20.9 percent a year ago, driven by continued strong productivity improvements in stores, combined with disciplined expense controls.
Brian Sozzi, an analyst at Wall Street Strategies, said customers are going to Target for fresh foods or consumables, such as toothpaste, and shopping for apparel. “[Consumers are] looking for that sense of satisfaction after saving up for so long,” he said.
By contrast, Wal-Mart Stores Inc. called its apparel business a “work in progress” after reporting first-quarter results on Tuesday that topped Wall Street’s estimates. “You definitely don’t see the type of assortment at Wal-Mart that you do at Target,” Sozzi said.
Liberty of London + Target, a limited time program consisting of 300 items across several areas of the store was “an undisputed success,” Tesija said, noting that consumers responded to the color and prints in the collection and the springtime optimism it suggested. “The most popular items were women’s tops and accessories, girls’ dresses, tabletop and storage,” she said.
Target’s collaboration with Zac Posen for Go International in April included 44 pieces with a top price of $200. Cynthia Vincent’s footwear will be available until July, and Eugenia Kim’s hat collection will be in stores through the end of June.
Regarding back-to-school, Tesija said, “last year’s environment was challenging, and we anticipate more favorable results.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews