Why Target's earnings were so good: Analyst

Target beats Street, raises forecast
Target beats Street, raises forecast

Target delivered quarterly earnings and revenue that beat analysts' expectations on Wednesday, a day after Wal-Mart missed on profit and cut guidance.

"It's almost the opposite story [from Wal-Mart]; terrific sales results, earnings came in very strong," retail analyst Joseph Feldman said moments after Target announced its results. He said CEO Brian Cornell has been doing a great job after a year in the job, and that's "being reflected in the numbers."

The retailer posted fiscal second-quarter earnings of $1.22 per share, up from 78 cents in the year-earlier period. Revenue rose to $17.43 billion from $17 billion the previous year.

Analysts expected Target to post earnings of $1.11 per share on $17.4 billion in revenue, according to a consensus estimate from Thomson Reuters.

Target shares were up more than 4.5 percent in premarket action. (Click here to track the stock.)

Feldman, senior managing director at Telsey Advisory Group, told CNBC's "Squawk Box" that Target had lost its way for a while. "They've transitioned the head merchant. They're in the process of searching for a head merchant. And there's definitely been some changes at the top."

"They are [now] refocusing on the core business and doing what they do best. They add some fashion to some discounted product," he said.

One of the problems for Target and other retailers is there's no really hot fashion trend right now except for athleisure, wearing workout clothes for everyday, Feldman said. "This whole athleisure trend is here to stay."

Kids nowadays go dressed to school more casually than their parents did, he said. "They're in shorts [and] T-shirts. They're not dressing up collared shirts and jeans and khakis like we all used to when we were kids."

Target said it now expects full-year earnings per share of $4.60 to $4.75, compared with prior guidance of $4.50 to $4.65 a share. In third quarter 2015, the retailer expects earnings per share of 79 cents to 89 cents, compared with 79 cents in third quarter 2014.

Digital sales for the quarter increased 30 percent at Target, contributing 0.6 percentage points to comparable sales growth.

Although a relatively small impact, Feldman said, "The omnichannel is really important for retail. You really need to have this fully integrated brick-and-mortar with a digital [presence]."

Target also said it returned $1 billion to shareholders in the second quarter through dividends and share repurchases.

"I think investors view that favorably these days. And we're seeing it from a lot of others, whether it's Home Depot, Lowe's or Wal-Mart, they're all buying back a lot of stock," Feldman said.

Earlier this week, Target promoted Chief Financial Officer John Mulligan to the newly created chief operating officer post, effective next month. Cathy Smith, a former CFO at Express Scripts, will replace Mulligan.

It marks the company's latest restructuring move since Cornell took over last August. Target has focused on cost cutting and boosting margins in recent quarters.

The company has said it will cut about 16,000 corporate jobs.

Read MoreTarget to pay Visa issuers up to $67M over data breach

Also this week, Target confirmed it would pay Visa card issuers up to $67 million over the Christmastime 2013 data breach. Costs of the breach—which affected about 40 million cards—were already reflected in fiscal 2013 and 2014 results.

—CNBC's Jacob Pramuk and Terri Cullen contributed to this report.