Target hit the bull's eye.
The big-box retailer surged 14% in Wednesday's trading session, hitting an all-time intraday high after posting earnings and sales results for its fiscal third quarter that handily beat Wall Street estimates.
Brian Cornell, the company's CEO and chairman, said in an interview with CNBC on Wednesday that when Target is able to strike a "balance between inspiration, ease and value," its customers "reward" it "by shopping more in-store and also online."
Retail industry leaders were impressed with Target's results. Here's what four of them, including Jim Cramer, are watching now:
Cramer, who hosts CNBC's "Mad Money," said the recent wave of results makes him feel "very bullish" about the state of the U.S. consumer:
"Let's just put to rest any notion that the tariffs are really hurting spending, that there's any real inflation, that the consumer's being hurt. Kohl's is an outlier. Home Depot had a glitch that, if they manage to get it back on track, which they said they will, [the] numbers are OK. Lowe's was really extraordinary, [CEO] Marvin Ellison working his magic. Still feels like it's a work in progress. What can I say about Target? That's where people are shopping. So, I think that this whole story line that it's Kohl's and Home Depot versus, say, Lowe's and Target is false. The dichotomy is that if you spent a lot of money on technology, you're winning, and if you didn't, you're losing, and the places that are spending — Walmart and Target — represent America, making me feel very bullish about the consumer."
Moody's lead retail analyst Charles O'Shea said Target impressed even his team with its quarterly report:
"I think Target's one of the best retailers out there right now, and I think there's room for Target to run on all fronts. The food business is just gaining traction. I think Brian Cornell's strategy with food was spot on. We thought they needed to do it earlier; they didn't. They waited a little while. Food drives traffic. You get better exclusive and private-label brands around the home and apparel side, so when that traffic comes into the stores and on the website, you've got more things to sell than higher margin. So, I think Target's just rockin' and rollin' right now."
Former Toys R Us CEO and retail industry veteran Gerald Storch said one of Target's data points was especially strong:
"They're doing a great job, but keep in mind that 92.5% of Target's sales are still store based. You can see that in their report today. So, that's what's remarkable, is that in this internet era, their store comp was 2.8%. That would've been good before the internet. That was a good number. And then they had the 31% internet growth on top of that. So, they're doing a great job merging the two. They're going to keep growing. The 4.5% out of Target for a total comp? That's like what we used to do in the old days when the economy was just on fire. And, by the way, people ask about the health of the consumer. One of the best signs I see that the consumer is very healthy is that in good times, Target beats Walmart; in bad times, Walmart beats Target. We've been saying that for, like, three decades. So, Target did a 4.5[%] comp. Walmart did a 3.2% comp. Both still good, but Target better."
Paul Trussell, a managing director at Deutsche Bank, said some of Target's strategies have had outsized payoffs:
"Even more impressive was the [earnings before interest and taxes] gain year over year of 22% from an operating income standpoint, and they're doing this through lower fulfillment costs. They're also really improving the category mix and they're taking a lot of share in discretionary categories. And we see a ton of catalysts ahead as we think about the newly rolled-out Target Circle membership program, the Good & Gather on the food side, and we think there's a strong free cash flow profile here as well that's not only leading [Target] to remodel stores today, but will buy back a ton of shares in the outer years."
