Target fourth-quarter earnings fell less than expected in its Tuesday morning report. Target stock edged up Tuesday after fading in premarket trade.
Retail competitor Walmart comfortably topped earnings last week on strong holiday sales. However, it provided a less-than-spectacular outlook, guiding low-single digit foot traffic growth but a dip in full-year adjusted earnings.
Last Wednesday, Target announced will invest $100 million to speed up delivery times by opening more than six new sortation centers by the end of 2026, bringing the total network to more than 15 facilities. Target expects sortation centers to double their delivery volume to 50 million packages in 2023.
Earnings
Target's adjusted earnings dropped 40% to $1.89 per share while revenue climbed 1.3% to $31.48 billion for the quarter. That managed to top the FactSet consensus of a 56% earnings drop to $1.40 per share on a slight dip in revenue to $30.675 billion.
Total comparable sales inched up 0.7% for the period. Same store sales rose 1.9%, offset by a 3.6% decline in digital sales. FactSet projected same store sales to fall 1.6% during the period.
"We're pleased that our business delivered comparable sales growth in the fourth quarter, in what continues to be a very challenging environment," CEO Brian Cornell said in the announcement. Strength in food and beverage, and beauty and household essentials drove results, but softness in discretionary categories weighed on the performance.
For Q1 2023, Target forecasts comparable sales to range from a low-single digit decline to a single-digit increase. Adjusted earnings and GAAP earnings are both expected to range from $1.50 to $1.90 per share on a 4% to 5% increase in operating income. FactSet projects adjusted earnings to edge down 1.8% to $2.15 per share.
Target Stock
Target stock rose 1% Tuesday after turning slightly lower in premarket action. Shares are rebounding from a test of support at their converged 50-day and 200-day moving averages. The break of a down-sloping trendline, right around 170, could constitute an early entry for aggressive investors. The official buy point is 181.80.
TGT shares are up 13% so far this year.
You can follow Harrison Miller for more news and stock updates on Twitter @IBD_Harrison.
