Target shares surge on bumper profits despite in-store, online sales falling
Target saw its share price soar Tuesday morning after it reported better-than-expected results despite a fall in sales over the holiday period.
The Minneapolis retailer boosted its profit margin and earnings-per-share despite seeing comparable sales both in stores and online decline by 4.4% in its 4th Quarter, the third quarter in a row sales have fallen. Store sales dropped 5.4% and online sales fell 0.7% compared to a year earlier.
However, the company saw its profit margin to 5.3%, almost 2% higher than the same quarter last year, with Q4 net earnings hitting $1.38 billion, up 57.8% from the $876 million in the same quarter last year.
Partly credited for the increase in profits were "efficiency efforts" that it says resulted in more than $500 million in savings across 2023.
And despite a year in which it raised concerns about so-called organized retail theft, Target said it saw costs relating to inventory shrink (when a company has fewer items in stock than its recorded inventory states) were lower than a year ago.
The company said that while "store loss rates" did rise last year, the retailer improved at "maintaining appropriate inventory levels," which meant it didn't have to slash prices as much to shift excess inventory.
There continues to be success with Target's same-day services, with in-store pickup, Drive Up and Shipt sales rising by 13.6% for the quarter, accounting for 10% of all sales, which was "led by growth in Drive Up."
Target saw its share price rise by almost 12% on Tuesday morning, increasing the company's market cap to $77.67 billion.
The stock rose despite the company issuing a cautious outlook for the coming year, saying that it expects a "modest" rise in comparable sales of 0-2% for the coming year.
"Our team's efforts changed the momentum of our business, further improving our sales and traffic trends in the fourth quarter while driving profitability well ahead of expectations," said Brian Cornell, Target CEO.
"Throughout the season, guests responded to newness, value, and the inspiration and ease of our in-store and digital shopping experience. Looking ahead, we'll continue to invest in the strengths and differentiators that have delivered strong financial performance over time.
"We'll also roll out fresh innovations, including our new Target Circle membership program, as part of our roadmap for growth aimed at meeting consumers where they are, reigniting sales, traffic and market share gains, and positioning Target for profitable growth in 2024 and beyond."
