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.”
The annual Veuve Clicquot Polo Classic in Pacific Palisades this weekend drew Kate Hudson, Tracee Ellis Ross, Laura Dern and more. See pictures of the star-studded event on WWD.com. (📷: @chelsealaurenla) #wwdeye
In his new book “Hollywood Royale,” Andy Warhol’s Protégé Matthew Rolston celebrates the Eighties revival of Hollywood glamour. Featuring more than 100 portraits taken by Rolston from 1977 to 1993, the book contains photos of icons like Michael Jackson, Cyndi Lauper, and @drewbarrymore, pictured here in 1991. “Hollywood Royale,” out today, will be accompanied by an exhibition opening at Los Angeles’ Fahey/Klein Gallery on March 1. #wwdeye
"Nowadays when life is not so happy with everything going on in the world, I think people come to me for a little bit of whimsy and color and fun." - Designer Rebecca De Ravenel on her cult-favorite jewelry line. (📸 : @vsteves) #wwd40
“Everyone is talking about how the retail industry is struggling, but I think it’s an incredible time because brands who are doing something different and innovative are setting themselves up for the future,” said @adamgoldston, who founded the luxury athletic brand @apl with his brother @ryangoldsten. The Goldston’s are part of WWD’s 40 under 40: a group of industry notables. See the rest of the list on WWD.com. (📷: @vsteves) #wwd40
@eyeswoon blogger Athena Calderone debuted her first-ever cookbook, “Cook Beautiful,” which is heavily centered on the presentation and visual expression of food. Pictured here are her miso glazed carrots from the book. Get the recipe on WWD.com. (📷: @johnny_miller_) #wwdeye
“It’s passion that helps get anybody to a certain point and it’s what’s propelled me,” said Kith founder @ronniefieg, one of WWD’s 40 under 40: a group of industry notables who are changing the face of retail, fashion and beauty. Fieg, who opened a Manhattan flagship on October 7, began his career at age 13 as a stock boy and salesman for footwear chain David Z. “I think staying true to [my] beliefs, hard work and passion have gotten me to where [Kith] is today.” See the rest of the 40 at WWD.com. (📷: @vsteves) #wwd40
25-year-old @samweaving is about to break out this fall, starring in Netflix’s horror film “The Babysitter,” fittingly out today on Friday the 13th. That’s not the only place you’ll be seeing her, though — Weaving’s got a role Showtime’s “SMILF” and another alongside Frances McDormand and Woody Harrelson in “Three Billboards Outside Ebbing, Missouri.” Though she’s got a full plate at the moment, there’s one role she’s got her eye on: Marilyn Monroe. “I’m a little too young at the moment, but it’s on my bucket list,” the actress told WWD (📷: @dandoperalski) #wwdeye
BFF's Poppy Jamie and Suki Waterhouse celebrated the launch of their bag line Pop x Suki at Nordstrom last night. "The line is really about our friendship, and how we are so different but complement each other," said Waterhouse. 👯 (📷: Katie Jones) #wwdeye
After designing the new @louisvuitton and @bulgariofficial flagships and a @chanelofficial boutique opening in Japan, @petermarinoarchitect has another project on his plate: The Lobster Club. Located in the Seagram Building, it’s the famed architect’s first restaurant project in New York, serving up modern Japanese brasserie-style cuisine. Bronze hues, bespoke material detailing, blush and chartreuse tones and a heavy emphasis on Picasso can be seen throughout. Mark your calendars for Nov. 1 for the much-anticipated opening. (📷: @clint_spaulding) #wwdeye