Jim Cramer explains Target’s turnaround and why the stock is a buy here

CNBC's Jim Cramer on Monday reviewed Target's recent successful quarter and suggested stock of the big-box retailer has room to run.
"Brian Cornell and his team have spent years executing a turnaround at Target and now the comeback is finally kicking in," he said. "Even though the stock soared last week, it's way down from its highs, so I'd be a buyer right here, right now."

CNBC's Jim Cramer on Monday reviewed Target's recent successful quarter and suggested stock of the big-box retailer has room to run.

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"Brian Cornell and his team have spent years executing a turnaround at Target and now the comeback is finally kicking in," he said. "Even though the stock soared last week, it's way down from its highs, so I'd be a buyer right here, right now."

Target last week beat Wall Street's expectations for earnings and revenue. While management struck a cautious tone for full-year sales — guiding toward the lower range of estimates — investors were not deterred, and shares jumped about 11% in response to the report. Target saw huge gains during the Covid-19 pandemic, but business weakened in the aftermath of it.

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To Cramer, the company is performing well in part because of its price rollbacks, a strategy that has served peers such as Walmart and Costco well. In May, Target announced it would roll back prices on roughly 5,000 items, including essentials such as bread, meat, milk and vegetables. The retailer also reported a positive trend in discretionary items for the fourth quarter in a row, with CEO Brian Cornell saying the apparel sector saw 3% comparable sales growth. These results come at a time when some companies with a discretionary focus warn of weakened demand from consumers.

Target has also made decent progress reducing theft, which had a big positive effect on margin growth, Cramer said. Management said it saw better-than-expected results in the most-recent store inventory counts, adding that the company expects next quarter's gross margin to benefit from "lower shrink costs." Cramer also said he was impressed by the relaunch of the retailer's loyalty program, which gained more than two million new members over the quarter.

"In the end, this was a really strong quarter from Target in a tough operating environment — easily their best quarter in recent history," he said. "Not only were the numbers phenomenal, but there was a feeling that the company's in a much better strategic position."