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Target Tops Q4 Sales Estimates Despite Weakness in Discretionary

Brian Cornell is bringing some unexpected sales gains to Wall Street, with Target Corp.’s fourth-quarter results topping estimates ahead of an investor meeting with analysts in New York on Tuesday. 

But Cornell, who is chairman and chief executive officer of the discounter, also acknowledged how “very challenging” retail is right now, with strength in beauty, food and household essentials dinged by “ongoing softness” in discretionary categories.  

Net earnings fell 43.3 percent to $876 million, or $1.89 a diluted share, down from $1.5 billion, or $3.21, a year ago, when consumers were splurging and the economy was stronger. 

Despite the decline, earnings per share topped the $1.40 analysts had penciled in by 49 cents. 

Revenues for the three months ended Jan. 28 increased 1.3 percent to $31.4 billion from $31 billion — much stronger than the 0.9 percent decrease analysts projected.  

For the year, Target’s net income fell 60 percent to $2.8 billion as revenues increased 2.9 percent to $109.1 billion.

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Investors approved of the results and are waiting to hear what comes out of the investor meeting. Shares of Target gained 1.6 percent to $169.42 in premarket trading. 

Cornell said the results showed the importance of Target’s breadth. 

“This performance highlights the benefit of our multi-category merchandise assortment, which drives relevance with our guests in any environment, and is a key reason we grew traffic every quarter last year,” he said.

Target CEO Brian Cornell. RICKY RHODES

Looking forward, the CEO said Target would focus on its long-term strategy while also “planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment.” 

“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,” he said. 

This year, Target has given itself a wide lane, projecting that comparable sales would range from a low-single digit decline to a low-single digit gain. Operating income is slated to grow more than $1 billion and earnings per share are seen rising to $7.75 to $8.75, compared with $5.98 last year.