Target forecasts more sales growth after bumper quarter

Target Corp on Wednesday posted quarterly sales that surged about 23%, raising hopes of booming demand through the year as consumers flock to stores and shop for more than just essentials.

Shares rose 4% after the retailer also forecast growth in comparable sales for the last two quarters of the year, countering Wall Street's fears of a sales drop, as it keeps pace with surging sales recorded during the pandemic's peak.

With the reopening of the economy due to vaccinations, Target, like Walmart and Macy's, said shoppers are spending more on apparel and beauty products as they prepare to socialize and travel.

"With vaccinations rolling out across the country and consumers increasingly comfortable venturing out, we've seen an enthusiastic return to in-store shopping," CEO Brian Cornell told analysts.

Target's focus in building its private-label brands, including designer dress collection and activewear line All in Motion, is paying off, with sales from the business rising 36% in the first quarter, their best growth so far.

That helped drive its overall apparel sales, which rose in the low-60% range.

Operating margin is likely to hit 8% or more this year as Target bets on the success of its private-label brands.

The executives also said the company is having no trouble in finding workers in a tight labor market, thanks to its investments, including raising minimum wage last year.

A rise in store traffic and digital sales, boosted by same-day delivery services, drove a 22.9% jump in comparable sales. Analysts were expecting a 9.93% rise, according to IBES data from Refinitiv.

"Stimulus turbo boosters will inevitably ebb, yet Target's ability to win and retain consumers during and after COVID is what should hopefully serve them well into the future," Evercore analyst Greg Melich wrote in a note.

Excluding items, Target earned $3.69 per share, beating estimates.