Target Delivers Mixed Fourth Quarter

The retailer joined J.C. Penney, Macy's and Kohl's and more in posting disappointing holiday sales.

By Sharon Edelson on March 3, 2020

Target Corp. shares rose nearly 6 percent in pre-market trading on Tuesday after the mass retailer reported stronger earnings than expected for the 2019 fourth quarter, but sales weren’t able to rebound from a disappointing holiday period.

Earnings per share for the fourth quarter ended Feb. 1 of $1.69 a share exceeded analyst expectations of $1.65 a share. But revenue of $23.4 billion fell short of Wall Street’s $23.5 billion projection. Same-store sales increase of 1.5 percent were in line with expectations.

The Minneapolis-based retailer had planned to hold a meeting for the investment community in Manhattan today, but canceled the event, citing “the rapidly changing situation regarding the coronavirus.”

Fourth-quarter comps reflected a 20 percent increase in comparable digital sales, while full-year comparable sales advanced 3.4 percent, reflecting comparable digital sales growth of 29 percent.

Net income in the fourth quarter rose to $834 million, or $1.65 per share, from $799 million, or $1.54 per share in the prior year’s quarter.

Sales in the fourth quarter increased 1.8 percent to $23.1 billion, from $22.7 billion in last year’s fourth quarter. Full-year sales increased 3.6 percent to $77.1 billion from $74.4 billion last year, reflecting a 3.4 percent increase in comparable sales combined with sales from non-mature stores. Full-year revenue of $78.1 billion grew 3.7 percent compared with last year, reflecting sales growth of 3.6 percent and a 6.3 percent increase in other revenue.

Target last month said holiday comp-store sales rose 1.4 percent, which was weaker than expected, with key categories such as toys and electronics not performing as well as planned. The retailer’s comp-store sales in the 2018 November and December period rose 5.7 percent.

“The strategic investments we’ve made over the past several years to elevate the shopping experience, curate our multicategory assortment at scale, and deliver ease and convenience through our fulfillment capabilities are deepening our relationship with our guest,” said Brian Cornell, chairman and chief executive officer of Target. “As we look ahead to 2020 and beyond, we’re well positioned to build on this strong foundation to further differentiate Target and drive long-term, profitable growth.”

The retailer issued guidance for the first quarter of 2020, calling for a low-single-digit increase in same-store sales and a mid-single-digit increase in operating income, and EPS of $1.55 to $1.75.

For full-year, Target expects a low-single-digit increase in comp-store sales and a mid-single-digit gain in operating income, with EPS seen falling between $6.70 and $7.

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