Goal On Tuesday it reported quarterly revenue and profits that beat Wall Street expectations, but the company said it expects another year of weak sales.
Comparable sales at the Minneapolis-based retailer fell for the third straight quarter. The key metric, which includes digital sales and excludes the impact of store openings, closings and renovations, fell 4.4% in the fiscal fourth quarter.
Target doesn't expect sales to come back quickly. For the current quarter, Target said it expects comparable sales to decline between 3% and 5% and adjusted earnings per share to range from $1.70 to $2.10. The company said it expects 2024 comparable sales to be flat by 2% and adjusted earnings per share to range from $8.60 to $9.60.
However, Target emphasized its progress after a difficult period marked by lower discretionary spending. Store and website traffic, although down year over year, improved for the second straight quarter. Profits jumped thanks to the company's better management of inventory and its benefit from lower supply chain, shipping and e-commerce costs. The focus on lower price points has resonated with shoppers.
In a press release, CEO Brian Cornell said the company's efforts “changed the momentum of our business.”
Target will roll out new sales drivers, including a membership program, to return the company to growth, he said.
Company leaders will share more of their strategy at an investor meeting in New York City on Tuesday.
Here's what the retailer reported compared to what Wall Street was expecting, based on a survey of analysts conducted by LSEG, formerly known as Refinitiv:
Earnings per share: $2.98 vs. $2.42 expected Revenue: $31.92 billion vs. $31.83 billion expected
Target's sluggish sales reflected a decline in discretionary spending over the past two years, especially after huge gains stemming from the pandemic. Its total annual revenue grew by about $31 billion — or nearly 40% — from fiscal year 2019 to 2022 before sales stabilized. Target also said it took a hit in recent quarters from high levels of theft and the fallout from backlash over Target's line of Pride Month merchandise.
To attract shoppers, big-box retailers have focused on value and frequently purchased categories, such as food and beauty. During the holiday season, for example, Target promoted a wide range of gifts and a holiday meal for four for under $25.
And last month, it launched a new, lower-priced private label brand called Dealworthy, with products like socks, paper towels, laundry detergent and more. Most items cost less than $10.
Target's profits have suffered along with its sales. But the retailer made more profits in the fourth quarter than it did a year ago, as it discounted fewer items, operated more efficiently, and had more products in stock.
Target's net income for the three-month period rose nearly 58% to $1.38 billion, or $2.98 per share, from $876 million, or $1.89 per share, in the same quarter a year ago. This was well above Target's expected range of $1.90 to $2.60 per share.
Its margins were also healthier compared to last year. The operating income margin rate for the fourth quarter was 5.8% compared to 3.7% in the same quarter last year, a time when Target's results took a hit as customers bought fewer high-margin items like apparel, and more low-margin items, like Food and household supplies.
In its fiscal fourth quarter ended Feb. 3, Target's total revenue rose nearly 2% from $30.98 billion in the year-ago period. These results got a boost from an additional week of sales compared to fiscal 2022.
Comparable sales in stores and online declined. Comparable store sales declined 5.4% year over year. Digital sales fell 0.7% year over year, representing an improvement from the 6% decline in the third quarter.
The sequential improvement in traffic trends — from a 4.1% decline in the third quarter to a 1.7% decline in the fourth quarter — was driven by a greater number of shoppers using curbside pickup.
As of Monday's close, Target shares were up about 6% so far this year. That's less than the S&P 500's gain of roughly 8% over the same period. Target shares closed Monday at $150.49, bringing the company's market value to $69.48 billion.
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