Why Shares of Target Popped Today

What happened

Shares of Target (NYSE: TGT) jumped on Wednesday after the retailer reported strong second-quarter results. The company produced its best store traffic growth in a decade, and its online sales surged by more than 40%. As of 12:20 p.m. EDT, stock was up about 5.1%.

So what

Target reported second-quarter revenue of $17.8 billion, up 6.9% year over year. Comparable-store sales rose 4.9%, driven by traffic growth of 6.4%. Overall comparable sales, which factor in the 41% online sales growth, jumped 6.5%. That's the best comparable-sales growth in 13 years, and the best traffic growth since Target began reporting traffic numbers 10 years ago.

Non-GAAP earnings per share came in at $1.47, up 19.8% year over year and $0.07 higher than the average analyst estimate. Gross margin dipped slightly on higher online fulfillment costs and operating expenses rose as a percentage of revenue, but a much lower tax rate drove the double-digit earnings growth.

"We are extremely pleased with Target's second quarter results, which demonstrate our guests' excitement for the enhanced and differentiated shopping experience we're building," said Target CEO Brian Cornell.

Now what

Target expects to produce EPS between $1.00 and $1.20 in the third quarter, up from $0.90 in the prior-year period. For the full year, the company now sees EPS between $5.30 and $5.50, up from a previous guidance range of $5.15 to $5.45. Comparable-sales growth of around 4.8% is expected in the third quarter and in the second half.

Target's results were driven by strong consumer spending, the company's extensive collection of new exclusive brands, and a handful of aggressive e-commerce initiatives launched this year. While consumer spending won't always be this strong, the company's strategy is clearly working.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.