The last couple of years haven’t been good ones for retailer Target Corporation (NYSE:TGT), or for owners of TGT stock.

Some ill-advised strategic decisions coupled with continued competitive pressures from Wal-Mart Stores Inc (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN) pulled Target shares nearly 40% lower from their mid-2015 high, with investors correctly foreseeing last year’s 5% slide in revenue and 19% year-over-year decline in earnings.

But with all that said, it’s possible the worst for Target may be in the rear-view mirror.

This morning, the company updated its guidance for the quarter currently underway, and TGT stock jumped more than 5% on the good news.

TGT Stock: Growing Again?

The official statement didn’t divulge much in the way of numerical details, but Target Corporation confirmed Thursday morning that its same-store sales for Q2 would be up modestly. Analysts were expecting another decline, this one to the tune of 1.2%.

CEO Brian Cornell explained:

“Target’s recent progress reinforces our confidence and commitment to our strategy as we build an even better Target for tomorrow. 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. Our team is energized and focused on enhancing and modernizing the Target shopping experience, and our guests are responding.”

At least part of that strategy includes competing with the aforementioned Walmart and Amazon on price … something the retailer had mostly shied away from in the past, choosing instead to focus on delivering a more premium shopping experience.

Lower prices seem to be paying for themselves though, drawing more foot traffic into its stores, and to its e-commerce venue. Target suggested it would be posting a profit near the upper end of its previous guidance range of between 95 cents and $1.15 per share. Bolstering that figure between 5 and 9 cents is a tax benefit related to the company’s global outsourcing operations, though an unfavorable tax matter is crimping the bottom line between 2 and 3 cents.

Analysts were collectively calling for a second-quarter bottom line of $1.06 per share of TGT stock … a figure that’s now apt to be beat.

Still, that’s notably less than the $1.23 per share the retailer earned in the second quarter of last year, and while same-store sales should be up slightly, mum was the word on total revenue. Experts were calling for a top line of $16.02 billion, down 0.9% on a year-over-year basis.

To that end, Kantar Retail analyst Leon Nicholas commented “You also have to consider they had set the bar pretty low … They had said to look at this year like a transition year.”

Looking Ahead for TGT Stock

It was a win for Target to be sure, though that doesn’t in itself get the retailer over its hump. It does suggest Target stock is back on the right trajectory, however, and by doing more of what it’s doing, it could be able to pick itself back up by its bootstraps.

Part of the new-and-improved TGT stock is a strong focus on its own exclusive brands like Cat & Jack. The company’s aim is to launch 12 private brands before 2018 comes to a close. House brands are typically more profitable for retailers.

Also mentioned within the company’s statement was a promising pilot program that facilitates next-day deliveries. Called Target Restock, the program allows access to more than 10,000 consumer goods, delivered in a box up to the size of a shopping cart. The Restock program takes dead-aim at Amazon’s quick delivery of essential goods by rival Amazon. Though the program in itself won’t be enough to turn the tide, it helps.

Areas that still need revenue-enhancing attention include food and digital. Nicholas made a point of saying he’s not seeing enough innovation in Target’s grocery aisles.

Overall, the news earned a grade of B-, with a chance to raise that grade to a B or even a B+ if TGT can report Q2 numbers that are even healthier than implied today. As for TGT stock, Thursday’s announcement is enough to put it back on your watchlist, but not necessarily back in your portfolio.

— James Brumley

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Source: Investor Place