Shares of Target Corp (NYSE: TGT) surged to record highs on Wednesday after the retail giant reported better than expected earnings and revenue, extending an impressive growth streak that has been underpinned by booming digital sales.

 

Q2 Earnings Summary

  • Earnings: $1.82 per share
  • Revenue: $18.42 billion
  • Same-store sales growth: 3.4%

Target posted another quarter of market-beating returns, with revenues hitting $18.42 billion. Company profits surged 17% to $938 million, which translates into $1.82 per share. Analysts in a median estimate were calling for revenue of $18.34 billion and earnings per share of $1.62.

Same-store sales also jumped 3.4% versus 2.9% expected. Growth in this category was largely driven by same-day fulfillment services, which contributed 1.5 percentage points. Target’s same-day fulfillment services include order pick up, drive up and Shipt, a same-day delivery business.

“These options offer speed, convenience and reliability,” Target CEO Brian Cornell said on the earnings call. “And as a result, they’re quickly becoming the fulfillment choices for our guests. And most importantly, because these options leverage our existing in-store infrastructure, technology and teams, same-day fulfillment delivers outstanding financial performance as well.”

Meanwhile, digital sales continued to surge, rising 34%. E-commerce revenue rose by 42% during the previous quarter.

E-commerce and same-day deliveries will likely be the linchpin for Target’s future growth as it tries to compete with Amazon. Store pickups appear to be growing in popularity as consumers opt out of longer shipping times. If this trend continues, Target is likely to benefit.

 

TGT Stock Hits Record High

Target’s share price blew past $100 on Wednesday for the first time, gaining as much as 21% in the process. By comparison, the large-cap S&P 500 Index was up 0.9%, with its consumer discretionary component having gained 1.8%.

TGT peaked at $103.32 on Wednesday. It would eventually close at $103.00, having gained 20.4%.

The record surge pushed Target’s total market capitalization north of $52.8 billion.

Target’s share price has been outperforming the broader market for all of 2019. The stock has returned 35% year-to-date, compared with 22% for the S&P 500’s consumer discretionary index.

 

Conclusion

Retail’s digital transformation has separated the winners from the losers. The likes of Walmart and Target are benefiting thanks to major investments in e-commerce while department stores like Macy’s, Kohl’s, and J.C. Penny have struggled to keep pace. Target stands to gain even greater market share as the digitization trend intensifies.

Disclaimer: Author holds no investment position in Target at the time of writing.