08:48 AM EDT, 08/21/2024 (MT Newswires) -- Target ( TGT ) raised its full-year earnings outlook on Wednesday amid improving trends across discretionary categories, as the retailer's fiscal second-quarter results exceeded market estimates.

Adjusted earnings are now anticipated to be between $9 to $9.70 per share for fiscal 2024, up from the prior guidance of $8.60 to $9.60, citing its "strong profit performance" in the first half. The consensus on Capital IQ is for normalized EPS of $9.32. Target's ( TGT ) shares climbed 15% in premarket activity.

The retailer projects comparable sales growth to be in the lower half of its previously issued outlook range of flat to up 2%, while the Street is currently looking for a rise of 0.4%.

Target's ( TGT ) adjusted EPS jumped to $2.57 for the quarter ended Aug. 3 from $1.80 the year before, topping analysts' $2.18 estimate. Total revenue improved 2.7% to $25.45 billion, ahead of the Street's view for $25.21 billion.

Comparable sales inclined 2%, above the 0.9% increase modeled by the market, as the number of transactions rebounded 3% versus last year's 4.8% decline. "Our growth was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services," Chief Executive Brian Cornell said in a statement. "We also saw improving trends across our discretionary categories, most notably in apparel, and we're seeing continued strength in beauty."

Gross margin increased to 28.9% from 27% in the prior-year quarter aided by cost improvements that more than offset higher promotional markdowns, according to the company. Selling, general and administrative expenses widened to $5.39 billion from $5.18 billion year-on-year.

The retailer's better-than-expected margins and earnings will boost investor confidence in its ability to return to an earnings before interest and taxes margin of more than 6%, Truist Securities said in an emailed client note. However, the brokerage said that Target ( TGT ) continues to lose market share with "incrementally negative stacked traffic." Truist has a hold rating on the stock.

For the current quarter, Target ( TGT ) expects per-share adjusted earnings to come in between $2.10 and $2.40, while the Street is looking for $2.24. Comparable sales are set to be flat to up 2% versus the market's estimate for same-store sales growth of 1.6%.

Price: 164.55, Change: +21.34, Percent Change: +14.90