Target's Positive Sales Growth, Guidance Helps Buoy Retail ETFs

Target (NYSE: TGT) shares surged on Tuesday on a positive outlook, helping to offset losses in retail sector-related exchange traded funds.

The VanEck Vectors Retail ETF (RTH) was up 0.1% on Tuesday while the broader Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) fell 2.1%.

Meanwhile, Target shares jumped 9.7% on Tuesday. TGT makes up 4.1% of RTH’s underlying portfolio and 2.7% of XLY’s.

Target shares climbed after the retailer revealed 9% sales growth over the fiscal fourth quarter, despite ongoing supply chain problems, and stated that its momentum could have legs, CNBC reports.

Looking ahead, Target argued that sales could continue to rise even as shoppers face rising prices on food, fuel, and other goods. The company projected revenue growth for the coming year in the low- to mid-single digits and estimated adjusted earnings per share to rise by high single digits, or both above analysts’ expectations, according to Refinitiv.

“We’re getting more efficient, more productive — and that’s flowing through to the bottom line,” CEO Brian Cornell told CNBC, adding that the average Target store has enjoyed $15 million in additional sales over the last few years.

Along with selling goods, the big box retailer stores also act as fulfillment centers where the company’s online orders are packed and shipped or prepped for customer pickup.

Target is seeing increased traffic through its digital channels. Comparable sales, which include sales from stores or digital channels operating for at least 12 months, increased 8.9% for the quarter that ended on January 29 year-over-year, with digital sales rising 9.2%, the Wall Street Journal reports.

“There are still concerns about Covid and Americans want to get back to some sense of normal life,” Cornell added. “They’re watching and looking for value right now, but they’re also looking for newness and experience. We see it all the time in our business. There’s certainly a consumer who’s worried about inflation, but they’ve got a pretty healthy balance sheet right now.”

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