Target (TGT) shares soared higher in early Tuesday trading after the retailer posted better-than-expected fourth quarter earnings and hinted at the rollout of a paid membership program as it looks to boost sales and store traffic over the coming year.
Target said adjusted earnings for the three months ending on Feb. 3 were pegged at $2.98 a share, a 58% increase from the year-earlier period that smashed the Wall Street consensus forecast of around $2.42 a share.
Group revenues, Target said, rose 1.65% to $31.92 billion, just ahead of analysts' estimates of a $31.83 billion tally. Same-store sales fell 4.4% from a year earlier, inside the Refinitiv forecast of a 4.6% decline, while digital sales were down 0.7%, extending their recent decline to a fifth consecutive quarter.
Operating-profit margins widened 210 basis points, or 2.1 percentage points, from the year-earlier quarter to 5.8%, Target said, while overall inventories were down 12% from a year earlier.
Looking into the current quarter, Target sees comparable sales falling between 3% and 5%, with a wide earnings range of between $1.70 and $2.10 per share.
"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 CEO Brian Cornell.
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"Looking ahead, we'll continue to invest in the strengths and differentiators that have delivered strong financial performance over time," he added. "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."
Cornell told investors the new membership program will be called "Target Circle 360" and is expected to launch next month. The "promo" price will be $49 a year, Target said, and will include unlimited same-day delivery.
Target shares were marked 12.3% higher following the earnings release and news of the new membership plan to change hands at $168.38 each, a move that extends the stock's six month gain to around 34.6%.
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