Target (TGT) on Tuesday recorded a 58% jump in fiscal fourth-quarter earnings that topped market estimates, as the retailer benefited from lower markdowns and shrink costs.
The company’s adjusted earnings came in at $2.98 a share for the three-month period ended Feb. 3, up from $1.89 the year before, surpassing the Capital IQ-polled consensus of $2.41. Sales moved up to $31.47 billion from $30.98 billion, with total revenue rising 1.7% to $31.92 billion. The Street’s view was for $31.85 billion.
Comparable sales fell 4.4%, compared with the 4.5% drop modeled by analysts, as the number of transactions decreased by 1.7%, according to the retailer. In the previous three-month period, same-store sales slipped 4.9% while traffic moved down 4.1%.
“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,” Chief Executive Brian Cornell said in a statement. The stock advanced nearly 8% in premarket trading.
Gross margin increased to 25.6% from 22.7% in the prior-year quarter due to lower markdowns and other inventory-related costs, among other factors. Expenses related to shrink, which refers to inventory lost due to theft or internal issues, declined on an annual basis as increases in store loss rates were more than offset by the timing of inventory accruals, the company said.
For the current quarter, Target expects adjusted EPS to be in a range of $1.70 to $2.10, while the Street is looking for normalized EPS of $2.03. Comparable sales are set to decline by 3% to 5% versus analysts’ estimate for a 3.9% decrease.
“We’ll continue to invest in the strengths and differentiators that have delivered strong financial performance over time,” Cornell said. The retailer will also look to new initiatives to reignite sales traffic and put it in a position for profitable growth in fiscal 2024, the CEO added.
Per-share adjusted earnings are pegged at $8.60 to $9.60 for the current fiscal year while same-store sales is seen at flat to up 2%. The market’s current view is for normalized EPS of $9.20 and a comparable sales gain of 1.1%. In fiscal 2023, adjusted EPS surged 50% to $8.94 while comparable sales were down 3.7%.