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story.lead_photo.caption This May 3, 2017, file photo shows a Target store in Omaha, Neb. Target Corp. (TGT) on Wednesday, Nov. 20, 2019, reported fiscal third-quarter profit of $714 million. (AP Photo/Nati Harnik, File)

NEW YORK — Target is bursting into the critical holiday season with strong third-quarter earnings as the company pushes faster delivery and invests in stores and on new fashion brands.

The retailer raised its expectations for the year and shares closed up more than 14% at $126.43.

Target's quarterly sales of clothing rose 10% year over year, helped by its focus on creating its own brands and updating its clothing displays.

While Target is boosting sales, department sales are struggling to attract shoppers. Kohl's has cut its profit outlook for the year after a disappointing third quarter dragged down by poor women's clothing sales. J.C. Penney's latest report showed its continued malaise in clothing. Macy's and Nordstrom report Thursday.

"Everyone is chasing the same stuff, and it's not working," said Stacey Widlitz, president of SW Retail Advisors. "Target is taking the best of retail and putting it into the store. Or the worst of retail and making it better."

During a call with reporters Wednesday, Target CEO Brian Cornell said the chain is picking up market share from both department stores and smaller mall stores. He also noted that store remodels have helped. Shoppers who previously just bought household essentials are now picking up clothing and home goods.

Overall, growth in stores open at least a year and online rose 4.5%. For just online, sales rose 31%.

Target is demonstrating how an intense focus on both low prices and customer convenience can put traditional retailers on a competitive footing with Amazon.com, which has upended the retail sector. Walmart last week raised its annual profit expectations after reporting strong third-quarter results helped by its grocery business.

Still, the holiday season is expected to be brutally competitive. Faced with the shortest holiday shopping season since 2013, retailers want to get into the minds of potential customers early.

Target is spending $50 million more on its payroll this quarter than it did during the same period last year to ensure customers can find help whenever they need it.

The Minneapolis retailer is also introducing new incentives this holiday season, such as a loyalty program called Target Circle that has signed up more than 35 million people. It found in an early test of the program that customers shopped more frequently and spent 2% to 5% more.

It's also offering a variety of options to buy, from picking up online orders curbside or in the store. Through Shipt, which it purchased in December 2017, shoppers for a fee can get deliveries to their doorstep in a few hours because there is likely a Target store nearby. The company said Wednesday that same-day services accounted for 80% of its third quarter digital growth.

Target's third-quarter results were "outstanding across the board," said Charlie O'Shea, lead retail analyst at Moody's Investors Service. He added that it should be able to avoid price cuts and other promotions that can eat into profits.

Third-quarter profit was $714 million, or $1.39 per share, including discontinued operations worth 2 cents. Adjusted earnings came to $1.36 per share, easily beating Wall Street per-share expectations for $1.19.

Revenue was $18.67 billion, also topping projections.

Target Corp. now expects adjusted earnings per-share of $6.25 to $6.45 in 2019, compared with earlier projections of between $5.90 and $6.20.

 

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