Target Q1 earnings: ‘they’re getting back on track’

Target Inc (NYSE: TGT) is in the green this morning after reporting market-beating results for its fiscal first quarter.

The retail stock is trending up also because the company reiterated its guidance for the full year. Target is now calling for a 0.7% increase in its comparable sales this year on $7.75 a share to $8.75 a share of adjusted per-share earnings.

In comparison, analysts were at 0.6% and $8.36 a share, respectively. On CNBC’s “Squawk Box”, Hightower’s Stephanie Link said:

There were some positives and some negatives. [But] the stock trades at 18 times compared to Walmart at 25 times. I think maybe they’re getting back on track. So, I’m pleased.

The second-quarter outlook, though, came in shy of estimates. Versus its year-to-date high, Target stock is still down more than 10% at writing.

Earned $950 million versus the year-ago $1.01 billion
Per-share earnings also declined from $2.16 to $2.05
Adjusted EPS printed at $2.05 as per the press release
Revenue edged up 0.6% year-on-year to $25.32 billion
Consensus was $1.77 a share on $25.26 billion revenue

Gross margin improved 70 basis points to 27.4% on the back of a 0.4% decline in cost of sales. According to Stephanie Link:

They’ve made massive strides in inventories. When you have sales up and inventories down, that’s a pretty good combination. Gross margins are improving because freight costs are down substantially.

Inventory was down 6.5% sequentially and 16.4% versus the same quarter last year. Wall Street currently has a consensus “overweight” rating on the Target stock.