Target's profit tops as turnaround efforts pay off, shares jump

[May 17, 2017]  (Reuters) - Target Corp  reported higher-than-expected quarterly profit and sales as some of its turnaround initiatives, including revamping stores and increased promotions, paid off.

The company's shares rose 8.4 percent in premarket trading on Wednesday, bringing some cheer to the retail sector, which has been hurt by weak performances from department store chains last week.

Target said in February it would undertake "aggressive promotional activities", revamp stores and invest in new brands and technology to combat competition from Wal-Mart Stores Inc <WMT.N> and Amazon.com Inc <AMZN.O>.

"We have started seeing improvement in store standards, including in-stocks, general tidiness and the front-end register experience as well as price investment," Jefferies analyst Daniel Binder said in a pre-earnings client note.

Sales at Target stores open at least a year fell 1.3 percent, better than the 3.6 percent decline expected by analysts polled by research firm Consensus Metrix.

The company said these sales fell due to a drop in customer visits and as shoppers bought fewer items on average.

This was partially offset by a rise in demand for swimwear, electronics such as the Nintendo Switch gaming console, and also products created in collaboration with celebrities such as Victoria Beckham.

The price war among U.S. big-box retailers is intensifying, with Wal-Mart and German grocery chain Aldi Inc taking actions such as changing prices frequently and forcing suppliers to reduce prices.

Target's net income rose to $681 million, or $1.23 per share, in the first quarter ended April 29, from $632 million, or $1.05 per share, a year earlier.

A newly constructed Target store is shown in San Diego, California May 17, 2016. REUTERS/Mike Blake/File Photo

The retailer had recorded a $261 million charge related to the early retirement of debt in the year-earlier period.

Excluding items, Target earned a profit of $1.21 per share.

Revenue fell 1.1 percent to $16.02 billion.

Analysts on average had expected earnings of 91 cents per share on revenue of $15.62 billion, according to Thomson Reuters I/B/E/S.

Target also said the higher-than-expected performance in the first quarter increased the probability of its full-year results coming in above the midpoint of its previous forecast.

It had forecast a low-single digit decline in comparable sales and adjusted earnings of $3.80-$4.20 per share for the year ending January 2018.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Martina D'Couto)

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