Target on Tuesday reported an increase in holiday quarter profits despite a weaker-than-expected sales decline, and forecast that comparable sales for the year would be significantly higher than Wall Street expectations, as the company ‘s stock price rose 12%.
The mass retailer is counting on same-day service, product launches and new membership programs to drive in-store spending.
Next month, Target plans to launch Target Circle 360, a membership feature that offers shoppers unlimited same-day delivery, CEO Brian Cornell said on an earnings call.
Target reported fourth-quarter adjusted earnings of $2.98 per share. In comparison, he earned $1.89 per share in the same period last year. Analysts’ average estimate was $2.42 per share, according to LSEG estimates.
Total comparable sales from November to January fell 4.4%, compared with analysts’ expectations for a 4.6% decline, due in part to a sales recovery at Target.com.
Online sales fell 0.7% in the fourth quarter, an improvement from a 6% decline in the previous quarter.
The company said strong Black Friday and Cyber Monday spending boosted sales in the holiday quarter, with shoppers drawn to newly launched collections including Kendra Scott jewelry and the private label Figmint kitchenware line. It is said that
Shoppers also responded to same-day pickup services such as Drive Up, which accounted for more than 10% of total sales in the quarter, the company said.
Over the next 10 years, Target plans to open more than 300 stores in the U.S. and renovate 2,000 existing stores, the CEO added.
consistent results
“The (biggest) takeaway is that we are now posting back-to-back strong quarters, which is exactly what the market is looking for from Target. It’s been elusive for years,” said Dave Wagner, portfolio manager at Aptus Capital Advisors.
The Target Circle 360 program will begin April 7 for five weeks at a special member price of $49, and will allow shoppers to get same-day delivery on orders of $35 or more, Target said. The minimum order threshold was similar to Walmart’s Walmart Plus program.
This quarter marks the end of a difficult year for Target. In the second quarter, Target reported that store visits and comparable sales declined for the first time since before the pandemic as inflation limited Americans’ spending on discretionary items, which account for 50% of Target’s revenue.
Prices for a basket of goods and services continued to rise in January, according to Commerce Department data.
The chain also faced unique challenges, including a May backlash over LGBTQ-themed products and a spike in retail crimes that led to the closure of nine stores.
Archrival Walmart said last month that although there are signs that discretionary spending is increasing, inflation is forcing shoppers to seek value on everyday items.
Cornell added that the new loyalty program and Target’s focus on rolling out new products and services should once again accelerate sales, traffic and market share growth in 2024.
“We spent much of last year observing consumers shift their consumption patterns from services to goods. This year, we see that consumption pattern normalize and return to a healthy balance of both goods and services. “It looks like it’s coming,” said Art Hogan, chief market strategist at B.Reilly Wealth.
Target announced its 2024 adjusted earnings forecast of $8.60 to $9.60 per share.
The midpoint of that range was roughly in line with analysts’ expectations of $9.14 per share, according to LSEG data.
Full-year comparable sales are expected to be in the range of flat to 2% growth this year, compared to analysts’ average estimate of 0.86% growth.
Gross profit margin for the fourth quarter ended February 3 increased to 25.6% from 22.7% a year ago, supported by lower transportation and supply chain costs, healthy inventories and lower markdown rates.
The stock closed at $168.58 and is up 18% this year.
