Shares of Target Corporation (NYSE:TGT) are rallying, up 2% in premarket, after delivering first quarter earnings this morning that beat analysts’ estimates. For the first quarter, Target posted earnings per share of $1.10 on revenue of $17.12 billion. Analysts polled were looking for earnings come show up around earnings per share of $1.03 on revenue of $17.08 billion. Target executives also took the opportunity to boost forward guidance for full year 2015 earnings per share figures to $4.50-$4.65, from the prior estimate of $4.45-$4.65.  Management said they are expecting second quarter earnings to come in between $1.04 to $1.14 per share.

Cost cutting measures help pad earnings at Target

Earlier in 2015, Target’s management announced they would be focusing on cutting costs and trimming down this year, in an effort to stay lean and efficient. Management laid out a cost cutting plan that would save the company $2 billion.  As noted in the plan, Target laid off 1,700 workers and discontinued another 1,400 open positions at its stores. Additionally, Target officially pulled out of Canada in April, after it closed the last of the 133 stores. However, Target did add to their lists of costs when the company followed Wal-Mart’s lead and rose minimum wage to $9 an hour at its stores. Increased wages certainly can hurt a business’s bottom line, but I believe that is why management has been cutting costs so aggressively this year.

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Target sees gross margin increase during quarter, digital sales up big

Aside from good number and figures “on the surface” of Target’s report, further digging reveals some important aspects.  During the first quarter, comparable same store sales were up 2.3%, gross margin increased from 29.5% to 30.4%, and digital sales rose a whopping 37.8%.  In addition, management returned $895 million to its shareholders during the first quarter through buybacks and dividends.