Shoppers leave a Target store in New York on August 15, 2021.
Scott Mullin | CNBC
the goal Holiday sales Tuesday beat Wall Street earnings expectations for the first time in a year. same time a year ago.
Still, large-scale retailers revealed shrinking profits and margins, gave conservative full-year outlooks, and said customers were throwing less random items into their shopping carts.
The company said it expects Equivalent sales, a key metric that tracks in-store and online sales that have been open for at least 13 months, range from a low-single-digit decline to a low-single-digit increase in fiscal 2023. Between $7.75 and $8.75. That was below Wall Street expectations of $9.23 per share, according to StreetAccount estimates.
CEO Brian Cornell said: In a release, the company said it performed well, with sales of groceries, beauty and home products growing as consumers focused on essentials despite a “very challenging environment.”
Cornell said on CNBC’s “Squawk Box” Tuesday morning, “I think guidance in this environment is appropriate.” We know interest rates are going up, and we’re going to be watching consumers very closely.”
Cornell will share details of its plans for this year’s target at Investor Day in New York City later Tuesday morning.
Shares of Target rose almost 2% in premarket trading on Tuesday.
This is what the company reported for its fiscal year 4th quarter It ended on Jan. 28, compared to Refinitiv’s consensus estimate.
- Earnings per share: $1.89 vs $1.40 expected
- Earnings: $31.4 billion vs. expected $30.72 billion
The company has topped the top and bottom lines, but cleared standards that have dropped significantly in recent months.
The big box retailer, known for its low-priced, trendy clothing and home goods, saw its sales skyrocket in the first two years of the pandemic. Its total annual revenue grew from fiscal 2019 to his fiscal 2022 by about $31 billion, or nearly 40%.
But over the past year, Target has faced changes in both sales dynamics and market sentiment. Discounters have become an industry icon due to concerns over inventory problems, squeezed margins and inflation-plagued middle-income consumers. The company underperformed Wall Street earnings expectations for the first three quarters of the fiscal year and warned investors to expect weaker year-end sales.
Target’s net income for the November-January period declined approximately 43% to $876 million, or $1.89 per share, from $1.54 billion ($3.21) for the year-ago period. rice field.
Comparable store sales, also known as comparable store sales, increased 0.7% in the fourth quarter. This beat Wall Street’s expectations of a 1.6% decline, according to StreetAccount estimates.
Customer traffic, including online and in-store, increased by 0.7% in the fourth quarter, while Target’s average ticket was broadly flat.
Sales of need-based products increased in the fourth quarter, according to Target. Food and beverages made up the strongest category, with comparable sales showing his low double-digit year-over-year growth. Essentials and beauty were up in the high single digits, while some discretionary-focused categories, such as home goods and apparel, were down, though the company didn’t specify the amount.
The company’s private brands were often cheaper than national brands and grew at a faster pace than overall sales.
One of Target’s weakest points is its profit margins, which are being squeezed by price cuts and rising supply chain costs. Last summer, Target announced an aggressive inventory plan to clear out unwanted items.
Its inventory levels are in better shape than in the previous quarter and are down Q4 sales increased by 3% year-on-year. The company’s inventories were up about 14% year over year in the third quarter, 36% in the second quarter and 43% in the first quarter.
Target says the product mix is also different. Inventory in the discretionary category was down about 13% compared to a year ago, as retailers ordered more frequent items like food and paper towels.
“We’ve noticed that consumer spending habits are changing,” Cornell said at “Squawk Box.” We’re going to do it right.’ We finished the year exactly where we wanted it to be. “
However, the company fell short of its goal of delivering healthier profit margins. When it lowered its earnings forecast for the second time in June, it promised an operating margin of about 6% in the second half. StreetAccount’s estimates put his target’s 3.7% operating margin in the fourth quarter, lower than his 3.9% in the third quarter, but above the 3.1% sought by Wall Street.
“We are on a multi-year journey to get back to pre-pandemic margin levels,” Cornell said. We’re selling more low-margin products such as , and selling less apparel and home goods, but that will ease over time.”
Target now says it plans to return to its pre-pandemic rate of 6% after next fiscal year, depending on the economic backdrop and consumer demand.
Target stock is down nearly 40% from its all-time high. It closed Monday at $166.81 per share, giving it a market value of nearly $77 billion. But so far this year, the company’s stock is up about 12%, outpacing the S&P 500’s nearly 4% growth.