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Target Gives Retail Sector Boost After Raising Q2 Guidance

Just a day after online shopping giant AMZN posted its biggest sales day ever thanks to its Prime Day event, big box favorite Target Corp. TGT increased its second-quarter earnings forecast on Thursday, causing its stock to surge higher.

Shares of Target are up over 3% in mid-morning trading. Retail peers have gotten a boost from the announcement as well. Walmart WMT is up around 1.3%, while Kohl’s KSS and Macy’s M stock have gained 3.8% and 4.2% so far today. Costco, too, is up around 1%, while apparel retailers like Gap Inc. GPS have jumped around 4.4%. Even the SPDR S&P Retail ETF XRT is up 1.4%.

Target now expects comparable store sales to increase “modestly” for the current quarter,” despite previous forecasts that same-store sales would be negative. The retailer pointed to improvements in the number of shoppers visiting its brick-and-mortar store locations.

Target also expects profit for the period to top its own estimates. Earnings are now projected to fall above the high end of its forecast range, which was 95 cents to $1.15 per share. Target said this was helped by a net tax effect related to global sourcing operations.

"Following better-than-expected results in the first quarter, we've seen additional, broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment," Target chief Brian Cornell said in a statement.

"The launch of Cloud Island in May was a success, and our team will be rolling out four more exclusive brands across Home and Apparel in the next few months, in support of our plan to launch 12 new brands by the end of 2018,” he continued.

Despite being caught in the middle of Amazon and Walmart’s ongoing retail war, Target has remained focused on fixing its own operational problems. The company plans on spending $7 billion to update its overall business, including renovating 600 stores and improving services like in-store pick-up for online orders, in addition to building out its network of online stores.

Target also added that it was pleased with the initial results from Target Restock, its net-day home delivery service the company is testing in Minneapolis-St. Paul.

Target is currently a #2 (Buy) on the Zacks Rank, with a VGM score of ‘A.’ The retailer is set to report its earnings results on August 16 before the bell.

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