Target Earnings Top Street Forecasts, But Deep Discounts Crush Profit Margins
"We're pleased that we entered the year in a very healthy inventory position, reflecting our conservative approach in discretionary categories," said CEO Brian Cornell.
"We're pleased that we entered the year in a very healthy inventory position, reflecting our conservative approach in discretionary categories," said CEO Brian Cornell.
Target Corp. (TGT) - Get Free Report posted better-than-expected fourth quarter earnings Tuesday, but deep discounts needed to shift excess inventory pressured profit margins and the retailer forecast disappointing growth for the coming year.
Target said adjusted earnings for the three months ending in December were pegged at $1.89 per share, down 40.1% from the same period last year but well ahead of the Street consensus forecast of $1.40 per share.
Group revenues, Target said, rose 1.3% to $31.4 billion, just ahead of analysts' estimates of a $31 billion tally. Target said same-store sales rose 0.7%, beating the Refinitiv forecast of 1.5% decline, while gross margins narrowed 200 basis points from the prior quarter -- and 3 percentage points from last year -- to 22.7%.
Inventories fell 2.9% from last year to $13.5 billion, Target said, a figure that narrowed from the 36% peak gain recorded over the second quarter.
Looking into the current quarter, Target said it sees same store sales ranging from between a low single-digit decline to a low single-digit increase, with earnings in the region of $1.50 to $1.90 per share. For the current fiscal year, Target forecast adjusted earnings of between $7.75 and $7.85 per share, firmly south of the Refinitv forecast of $9.23 per share.
"Looking ahead, we're focused on executing our long-term strategy, including continued differentiation through affordability, assortment, ease and convenience. At the same time, we're planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment," said CEO Brian Cornel. "We're pleased that we entered the year in a very healthy inventory position, reflecting our conservative approach in discretionary categories and our commitment to reliability in our frequency businesses."
"As we plan for the year ahead, we will continue to make robust capital investments and pursue efficiency opportunities in support of our long-term growth," he added. "We're proud of the loyalty and trust we've built with our guests, and want to thank our team for their ongoing commitment to delivering a truly exceptional and differentiated retail experience."
Target shares were marked 0.7% higher in pre-market trading immediately following the earnings release to indicate an opening bell price of $168.00 each.
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