Target Corporation reported fourth-quarter and full-year 2014 financial performance on Wednesday that surpassed expectations, excluding the impact of the recently closed Canadian division, an indication of a turnaround in its fortunes, at least in the U.S., may be underway.
Net sales from continuing operations in the three months ended Jan. 31 increased 4.1% to $21.8 billion from $20.9 billion last year, reflecting a 3.8% increase in comparable sales combined with sales from new stores. Digital channel sales contributed 0.9 percentage points to comparable sales growth.
Gross margin as a percent of sales increased by 84 basis points to 28.4% in the quarter.
Income from continuing operations grew by 22.3% to $1.4 billion in the period. However, the loss from the Canadian operation was $5.1 billion on a pretax basis, or a $3.6 billion after-tax hit to profits, resulting in a net loss to the company of $2.6 billion in the quarter.
Full-year 2014 sales increased 1.9% to $72.6 billion from $71.3 billion last year, reflecting a 1.3% increase in comparable sales combined with sales from new stores. Gross margin for the year slipped by 40 basis points to 29.4%.
Target paid dividends of $1.2 billion in fiscal 2014, an increase of 19.8% above 2013.
“We’re pleased with our fourth quarter financial results, which were driven by better-than-expected sales and particularly strong performance in our signature categories-style, baby, kids and wellness,” said Brian Cornell, chairman and chief executive officer of Target Corporation. “We’re seeing early momentum in our efforts to transform Target, and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experience while controlling costs by reducing complexity and simplifying the way we work. We’re confident that these efforts will allow us to grow our earnings while returning cash to our shareholders in 2015 and beyond, driving improvements in Target’s return on invested capital and creating long-term value for our shareholders.”