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MINNEAPOLIS – Target released Q2 earnings today, which reflected a return to topline growth and strong profit performance.
Comparable sales increased 2.0 percent in the second quarter, reflecting a comparable store sales increase of 0.7 percent and a comparable digital sales increase of 8.7 percent. Comp sales growth was driven by a 3 per cent increase in traffic.
Total revenue of $25.5 billion in the second quarter was 2.7 percent higher than last year, reflecting a total sales increase of 2.6 percent and a 10.8 percent increase in other revenue. Second quarter operating income of $1.6 billion was 36.6 percent higher than last year, driven by sales growth and a higher gross margin rate.
"We made a commitment to get back to growth in the second quarter, and the team delivered, all while expanding operating margins and growing EPS by more than 40% compared to last year. Importantly, our growth was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services," said Brian Cornell, chair and chief executive officer of Target. "We also saw improving trends across our discretionary categories, most notably in apparel, and we're seeing continued strength in beauty."
For the third quarter, the Company expects a 0 to 2 percent increase in its comparable sales, and GAAP and Adjusted EPS of $2.10 to $2.40.
While the Company believes its full-year guidance range of a 0 to 2 percent increase in its comparable sales remains appropriate, it now believes the increase will more likely be in the lower half of that range. However, based on strong profit performance in the front half of the year, the Company now expects full-year GAAP and Adjusted EPS of $9.00 to $9.70, up from the prior range of $8.60 to $9.60.
Second quarter operating income margin rate was 6.4 percent in 2024, compared with 4.8 percent in 2023. Second quarter gross margin rate was 28.9 percent, compared with 27.0 percent in 2023, reflecting the net impact of merchandising activities, including cost improvements that more than offset higher promotional markdown rates, combined with favorable category mix and lower book to physical inventory adjustments as compared to the prior year, partially offset by higher digital fulfillment and supply chain costs. Second quarter SG&A expense rate was 21.2 percent in 2024, compared with 20.9 percent in 2023, reflecting the combined impact of higher costs, including continued investments in pay and benefits, partially offset by disciplined cost management.
The Company's second quarter 2024 net interest expense was $110 million, compared with $141 million last year, primarily driven by an increase in interest income reflecting higher cash balances year-over-year.
Second quarter 2024 effective income tax rate was 22.9 percent, compared with the prior year rate of 22.2 percent, reflecting higher pretax earnings and lower discrete benefits as compared to the prior year.
The Company paid dividends of $509 million in the second quarter, compared with $499 million last year, reflecting a 1.9 percent increase in the dividend per share.
The Company repurchased $155 million of its shares in the second quarter, retiring 1.1 million shares of common stock at an average price of $145.94. As of the end of the quarter, the Company had approximately $9.5 billion of remaining capacity under the repurchase program approved by Target's Board of Directors in August 2021.
For the trailing twelve months through second quarter 2024, after-tax return on invested capital (ROIC) was 16.6 percent, compared with 13.7 percent for the trailing twelve months through second quarter 2023. The increase in ROIC reflects higher operating income, partially offset by higher average invested capital. The tables in this release provide additional information about the Company's ROIC calculation.
