Target Corp. boosted its full-year profit forecast Wednesday despite growing concern that President Trump’s global trade war may damage the economy and pinch the pocketbooks of the big-box retailer’s shoppers.
The Minneapolis-based chain predicted earnings per share of $5.30 to $5.50 a share for all of 2018, up from an earlier projection of $5.15 to $5.45 and driven partly by gains in children’s merchandise after the bankruptcy of Toys ‘R Us earlier this year.
“When we’re faced with tariffs or any other external factors, there are multiple levers we can pull to remain price-competitive and maintain profitability, and we are continually developing and implementing contingency plans,” Chief Executive Officer Brian Cornell told analysts and investors. “While we always account for risks like these when we plan for the future, today we are also focused on the multiple opportunities we see in front of us.
With its strongest traffic growth in 10 years and a 19 percent gain in net income, which reached $799 million in the three months through Aug. 4, Target joins retailers from Kohl’s to Advance Auto Parts and Home Depot that have yet to see significant impact from U.S. trade conflicts with both allies and competitors.
[Also read: Fed officials see another rate hike ‘soon,’ but fear trade war ‘uncertainty and risks’]
Economists have cautioned that may change later in the year as the Trump administration weighs 25 percent on as much as $400 billion in Chinese imports, in addition to $50 billion that have already been set. The White House has dismissed concerns from both lawmakers and industry leaders about the duties, which it says are. necessary to correct an imbalance between U.S. exports and imports.
Earlier this year, Trump imposed stiff tariffs on steel and aluminum to prop up the American metals industry, and his administration is studying levies on automobiles and parts.
“We’ve been carefully monitoring recent tariff announcements, and we’re aware of the potential for the situation to further escalate,” Cornell said Wednesday. “We’ve been expressing our concerns to our leaders in Washington, both on our own and along with other retailers and trade association partners.”
The retailer’s worry, however, is about “the impact of tariffs on consumers and the economy, not our ability to manage our business,” the CEO emphasized.
Target’s performance so far this year shows the payoff from a $7 billion investment plan that included redesigning stores, focusing on heightened customer service and emphasizing its digital channels to better compete with e-commerce firms like Amazon.
The retailer has made capital investments of $1 billion in the past three months and is on track to spend $3.5 billion for the full 2018 budget year, mostly on remodeling and new sites in urban areas and near colleges, said Chief Financial Officer Catherine Smith.
“The momentum of our results,” she said, “makes us more and more confident that we are making the right investment, and that affirmation is coming most strongly from our guests.”
