Brian Cornell is taking the long view.
Target's (TGT) chief executive explained the retail giant's vision to analysts on March 5 during the company's fourth-quarter-earnings call.
"Our preference is always to think long term," Cornell said, according to a transcript of the call. "So, our session today will focus squarely on the long-term thinking that has driven top- and bottom-line growth over the last decade and positions us for continued profitable growth in the years ahead."
Cornell noted the country and the retail industry "are in a prolonged post-pandemic return to normal, which has been nearly as unpredictable as the pandemic itself from a consumer, social, political, and economic perspective."
"By staying agile as a team and by continuously refining our approach and innovating, we've been able to navigate this time frame," he said.
Target reported fiscal-fourth-quarter earnings of $2.98 ashare on $31.92 billion in revenue. Analysts surveyed by FactSet were forecasting the company to earn $2.43 per share on $31.88 billion in sales.
A year earlier, the company had earned $1.89 a share on $31.39 billion in sales.
Looking ahead, Target forecast a fiscal-first-quarter comparable-sales decline of 3% to 5%. First-quarter GAAP and adjusted EPS are both expected to range from $1.70 to $2.10 per share. Analysts are for looking the company to earn $2.04.
Analyst: Target's sales still down
Target also said that it would open more than 300 predominantly full-size stores over the next decade and intends to remodel nearly 2,000 current stores.
And the company said it plans to reintroduce its Target Circle membership program on April 7, including three membership options.
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Target 360, a new paid membership, will be competing with the Amazon Prime and Walmart+ programs.
"This is just the beginning for Target Circle," Cara Sylvester, executive vice president and chief marketing and digital officer, told analysts. "Our AI-powered models will continue to deepen our relationship with guests and enable us to deliver one-on-one personalization at scale."
In looking over the results, Real Money columnist Stephen Guilfoyle said Target has a myriad of problems, as comparable sales continue to contract and “the balance sheet is still a mess.”
“That said, cash flows have improved dramatically, the balance sheet is better, and though sales are sloppy, margins have improved,” he wrote. “Oh, and management was smart enough to manage returns to shareholders in an intelligent manner. That's something we don't see every day.”
Several Wall Street analysts raised their price targets for the retail giant's shares following the earnings report.
D.A. Davidson analyst Michael Baker raised his price target on the company to $195 from $167 while affirming a buy rating on the shares.
He said that for all the enthusiasm around Target’s fourth-quarter results, sales are still down year over year and are expected to be again in the first quarter as “Target cycles the start of the worst of the negative [comparables] a year ago, in part due to the Pride issue.”
Last year. Target faced a right-wing-led backlash to its decision to highlight Pride merchandise tied to LGBTQ awareness.
Concerns about market position
The company said that it was pulling some LGBTQ-themed merchandise following what a corporate spokesperson described as “threats impacting our team members’ sense of safety and wellbeing while at work,” NBC News reported last May.
"The theme of moving past the issues of the last few years, including the inventory glut, inflation related crowding out and other missteps should continue to lead to a recovery in operating margins back to the pre-pandemic range," Baker said.
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Improving traffic trends help, he added, "and with the comp inflection in sight, Target is now investing in that growth in several areas."
Roth MKM analyst Bill Kirk raised the firm's price target on Target to $153 from $140 but reiterated a neutral rating on the shares.
The company's fourth-quarter results saw “stronger” profitability but also represented the worst year-over-year holiday quarter since 2008, he said.
Despite easier comparisons, physical stores' comparable store sales were down 5.4% - worse than the third quarter’s 4.6% slide and the second quarter’s 4.3% drop -- and its digital comparable sales were also negative.
Kirk raised concerns about Target's market position and suggested that the company's current trajectory points to a fading rather than improving stance.
While saying that Target's profit goals may be within reach, he expressed caution that a return to growth for the retailer is not guaranteed.
Morgan Stanley raised the firm's price target on the company to $190 from $165 and affirmed an overweight rating on the shares.
The investment firm cites the company's improving market share, inflecting top-line growth, and a visible path to an above-6% margin based on earnings before interest and taxes. Morgan Stanley noted that its 2024 and long-term guide "lean conservative" with more levers to the upside than downside.
Morgan Stanley also said that Target's traffic growth has held in relative to 2019, and the 14% four-year stack in the fourth quarter is well above 2019 levels.
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