NEW YORK (AP) — Target on Tuesday reported a 58% increase in fiscal fourth-quarter profits that handily beat Wall Street expectations as the discounter cut costs while keeping its inventory lean.
Revenue rose slightly from a year ago and also topped analysts’ projections. Comparable sales - those from stores or digital channels operating at least 12 months - slipped 4.4%. But that was a smaller decline than the 4.9% drop in Target’s third quarter and a 5.4% drop in the second quarter.
The Minneapolis retailer offered a cautious outlook for its sales and profits.
The results came out just hours ahead of Target’s annual investor meeting that should offer clues about its strategies for improving sales to customers being squeezed by inflation and high borrowing costs. Target is more vulnerable than Walmart and other big box discounters. More than 50% of its annual sales come from discretionary items like toys, fashion and electronic gadgets.
Target has been trying to strike the right balance between offering good value, while also infusing the stores with trendy items. Last month, the retailer launched a new collection called Dealworthy, which features nearly 400 everyday basics, starting at less than $1, with most items under $10. They include clothing and accessories, home items and electronics.
At the same time, Target’s deal, struck last year, with designer Kendra Scott to offer exclusive collections of earrings, necklaces has resonated with shoppers. So has its new kitchenware brand under the discounter’s own label Figmint.
A cost-cutting campaign helped the retailer’s profits rebound after it was burdened with too much inventory in the summer of 2022. The inventory glut forced it to discount heavily - and the effects lingered for a few quarters.
Target reported net income of $1.38 billion, or $2.98 per share, for the three-month period ended Feb. 3. That compared with $876 million, or $1.89 per share, for the year-ago period. The bottom-line results for the latest quarter well surpassed estimates of $2.42 per share, according to FactSet.
Revenue for the quarter was up 1.7% to $31.92 billion, above projections of $31.83 billion.
Traffic for both stores and online combined fell 1.7% during the latest quarter, but that was an improvement from the 4.1% drop in the third quarter.
For the current quarter, Target expects a comparable sales decline of 3% to 5%. Analysts are expecting a 3.6% drop, according to FactSet.
It forecast adjusted earning per share to be in the range or $1.70 to $2.10. Analysts expect $2.08 per share.
For the full year, Target anticipates a modest increase in comparable sales in a range from unchanged to a 2% increase. Adjusted earnings per share should range from $8.60 to $9.60, Target said. Analysts are expecting $9.15 per share, according to FactSet.
Shares rose more than 9% early Tuesday.
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