Target Posts Better Earnings Figures, Shares Up

US retailer Target Corp. on Tuesday presented market-beating earnings figures, driven by solid traffic and strong growth in digital sales.

The company upped its delivery offerings during the highly competitive holiday shopping season to contend with online giant Amazon.com Inc. and brick-and-mortar competitors such as Walmart Inc.

Target’s adjusted earnings per share (EPS) hit a new record at $1.53 per share on revenue of $22.98 billion for the fiscal fourth quarter ended February 2, beating analysts’ average estimate of $1.52 per share on revenue of $22.96 billion.  

On an unadjusted basis, the group’s net income shed 26.5 percent to $799 billion.

Target Chief Executive Brian Cornell stated that they have been driving an ambitious agenda to transform their company, evolve with their guests and drive strong growth.

On every count they have been successful, according to Cornell, and as they enter 2019, they will continue to lead the industry by adapting, innovating, and delivering more for their guests and shareholders.

Shares of Target gained 2.6 percent to $74.59 on Tuesday.

Target’s Digital Push Paying Off

Target’s comparable sales, which include both in-store and digital sales, advanced 5.3 percent compared with expectations of 5.08 percent.

Analyst Charlie O’Shea said the company’s strategic initiatives are clearly bearing fruit, with its online push continuing to generate impressive gains.

The Minneapolis-based retailer has been investing a great deal in its digital segment to gain an edge over Amazon and Walmart.

Target posted a 2.9 percent increase in brick-and-mortar sales, while it registered online sales and in-store traffic growth of 31 percent and 4.5 percent respectively.

The company said its e-commerce business added 2.4 percentage points to total same-store sales during the quarter.

However, those investments have pushed Target’s gross profit margin down by 25.7 percent in the quarter from 26.1 percent a year ago.

For the year, overall same-store sales were up 5 percent, the strongest level since 2005, while e-commerce sales rose 36 percent in 2018.

Looking to fiscal 2019, Target expects an adjusted EPS between $5.75 and $6.05 per share. The retailer also sees a low-to-mid single digit boost in comparable sales, and a mid-single digit rise in net income.

Target’s holiday-quarter results suggested that its investments in store revamps and delivery services are working. Its $7 billion plan to remodel stores and upgrade its digital footprint is reaching the 2020 deadline at a fast rate.

Cornel backed the initiative in 2017 in an effort to improve customer experience through better alignment of digital and physical access, revamping over a thousand locations to include a grab-and-go option for those customers in a rush as well as a bet for smaller stores in urban areas.          

Department store chains continue to face pressure and other mall-based retailers such as Gap Inc. and Charlotte Russe have already closed stores across the US.

Target and Walmart have been largely unaffected by the same sales decline that other firms are going through. Walmart’s online sales climbed as high as 43 percent in the fourth quarter.

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