Nearly a year after breach, Target turns around

MINNEAPOLIS - After a decidedly challenging year, Target Corp. finally is building some momentum heading into the heart of the holiday season.
The Minneapolis-based retailer pleasantly surprised investors on Wednesday by posting a 1.2 percent increase in same-store sales in the third quarter, its biggest gain in that closely watched metric in more than a year.
Sales were lifted in part by back-to-school and Halloween spending as well as strong showings in its toy and beauty departments. By comparison, its bigger rival Wal-
Mart reported a 0.5 percent gain for the same period.
Target said it expected to do even better during the fourth quarter, when it forecasts comparable sales to rise 2 percent. That would be its best showing in the past two years, though the comparison is against the period when sales plunged after a data breach last December scared away some Target shoppers.
In addition to the jump in same-store sales, Target beat expectations in the quarter ended Nov. 1 with profit that rose 3.1 percent and overall sales up 2.8 percent.
Investors reacted to the news by sending the company’s shares up 7.4 percent to $72.50, the highest close of the year.
“There were a lot of people who thought this ship was sinking and it was going to be way harder to turn it around,” said Brian Yarbrough, an analyst with Edward Jones. “But I think they’ve started to turn it.”
He added that the stores are looking better and Target has been rolling out more exciting merchandise, such as its holiday partnership with Toms, that is helping it reclaim its cheap-chic mantle.
“It feels like they’re getting back to what drove them in the ’90s and what has differentiated them from Wal-Mart and Amazon,” Yarbrough said.
Still, Target executives said they remain cautious about the next three months amid a promotional and competitive retail landscape. While there have been some encouraging signs such as lower gas prices, they noted that consumer spending remains volatile.
Brian Cornell, who joined Target as chief executive in August, has concentrated on helping it recover from the data breach, re-engineer its expansion into Canada and revamp its online offerings.
On Wednesday, Cornell outlined some of his strategic priorities including doubling down in digital commerce, better catering stores to local tastes, focusing on smaller store formats such as CityTarget and TargetExpress, and trimming costs to help fuel new investments. And, as he told employees at an annual meeting in September, he wants to invest more resources in Target’s signature categories such as style, baby, kids and wellness.
“This doesn’t mean we’re abandoning our other categories,” he said, adding that the retailer won’t step back from groceries, but may retool it to have more of a focus in natural and organic products.