Target’s profits exceeded Wall Street estimates as sales increased due to a heavy holiday season and store traffic increased in January.
Shares fell more than 4% on Tuesday lunchtime.
The big box retailer has benefited from shoppers looking for easy and safe ways to buy groceries and other items during the pandemic. Sales in 2020 rose more than $ 15 billion – more than total sales growth over the past 11 years.
Target was already reporting Christmas sales, but its online sales picked up when Americans received $ 600 worth of stimulus checks. The extra dollars in consumer pockets have boosted sales across the retail sector. Sales rose 5.3% in January, according to a government report.
In an interview with CNBC’s Squawk Box, CEO Brian Cornell said the company saw “increased traffic in our stores” and growth in everything from electronics to beauty in January. He said some shoppers had redeemed gift cards, while others were looking for new items to freshen up their homes or closets.
Still, Target declined to provide a forecast for the coming year, as the pandemic made it too difficult to predict consumer patterns.
The company reported for the fourth fiscal quarter ended Jan. 30, relative to Wall Street expectations based on an analyst survey conducted by Refinitiv:
- Earnings per share: $ 2.67 adjusted versus $ 2.54 expected
- Revenue: $ 28.34 billion versus $ 27.48 billion expected
For the most recent period, net income rose 66% to $ 1.38 billion, or $ 2.73 per share, from $ 834 million or $ 1.63 per share last year. Excluding items, Target earned $ 2.67 per share, more than analysts surveyed by Refinitiv expected $ 2.54 per share.
Revenue rose 21% from $ 23.4 billion last year to $ 28.34 billion, above analysts’ expectations of $ 27.48 billion.
Like-for-like sales, a key metric that measures sales in stores that are open for at least 13 months and online, increased 20.5% year over year as digital like-for-like sales increased 118% year over year. According to StreetAccount, this exceeded the comparable revenue growth of 16.8% expected by analysts.
Target has attracted new customers and increased purchases with its e-commerce offerings and wide range of merchandise, from cereal to training pants, as competitors like Macy’s and Kohl’s temporarily closed stores and saw sales decline during the pandemic. The big box retailer said it gained around $ 9 billion in market share during the fiscal year, citing internal and third-party investigations.
Customers bought from Target more often and bought more than in the holiday quarter. Combined traffic online and in stores increased 6.5% and the average ticket increased 13.1% year over year, the company said.
Target’s services on the same day as roadside pick-up and the home delivery service Shipt were particularly popular. Same-day service revenue increased 212% for the quarter. Revenue from the roadside pick-up service, Drive Up, increased more than 500%.
Target strengthens customer loyalty by offering various purchasing approaches. Customers who shop in multiple channels – for example, visiting stores and receiving shipments to their home – spend on average almost four times more than customers who only shop in stores and almost ten times more than customers who only shop online.
In the coming months, Target will face challenging comparisons due to the increased level of sales during the global health crisis. It will have to hold customers and their wallets on hold as Covid-19 cases decline, more Americans are vaccinated, and people may be able to return to old habits. Instead of consolidating trips in a Target store or on its website, shoppers can spend the weekends again at the mall or invest more money in restaurants, the movies or while traveling.
As of Monday’s close of trading, Target shares were up nearly 81% over the past year, bringing the company’s market value to $ 93.19 billion.
Read the Target press release here.