It’s all about the economy now
The second-quarter results Target reported last week were impressive by virtually every measure, and especially so considering economic headwinds have restrained consumer spending. Per-share profits increased 17% to 92 cents and set new record highs for a non-holiday quarter as customer traffic increased and profits in the credit card business increased 100%. Gross margins remained strong at 32%, and the business generated enough case that the company was able to increase its dividend by 47% and spend $900 million on buying back stock.
The biggest negative from the quarter was the fact that the company’s 1.7% same-store sales increase came up light against a guidance range of 2% to 4%. Looking ahead to the third quarter, conservative assumptions about the pace of the nation’s economic recovery have cause Target to assume same store sales will advance in the range of 1% to 3%.