Target Q4 Revenues Beat Estimates, CEO Exercises Caution as Consumer Spending Shifts

Target (TGT) posted Fiscal Fourth Quarter Earnings Results Before the market opened on Tuesday, consumer spending beat estimates as it shifted away from discretionary categories.

The Minneapolis-based retailer reported same-store sales rose 0.7%, beating the Wall Street estimate of -1.74%. Similar to Walmart’s ( WMT ) recent quarterly results, consumer spending at Target shifted toward essentials like food and away from categories like electronics, home and apparel.

Target shares rose more than 3.5% in pre-market trading after the report’s release.

Target CEO Brian Cornell said the group was pleased with continued sales growth in a “very challenging environment”.

Here’s what Target reported, compared to Wall Street estimates, based on Bloomberg consensus data:

  • Revenue: $31.40 billion and $30.46 billion expected

  • Adjusted earnings per share: $1.89 and $1.48 expected

  • One-stop-shop: 0.7% vs -1.74% expected

Cornell, Food and Beverage (it It began offering in 2010 following the Great Recession), aside from beauty and home goods, served the retailer well last quarter, Cornell said.

“Strengths in Food & Beverage, Beauty and Homeware offset ongoing softness in the discretionary categories. This performance highlights the benefit of our diverse merchandise assortment, which resonates with our guests in any context, and is a key driver of day-to-day traffic growth. Last year’s quarter .”

Same-store sales beat estimates, rising 0.7%, compared with expectations for a 1.74% decline. While store sales rose 1.9%, digital sales fell 3.6% in Q4.

At the end of Q4, inventories were 3% lower than in 2021. Meanwhile, in discretionary categories such as electronics, home and apparel, inventories were nearly 13% lower than in 2021, “partially offset by higher inventories in broadband categories.”

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For the full-year 2022 fiscal year results, revenue increased $3 billion to $109 billion. Compared to 2019, revenue is $30 billion higher. For the full year, same-store sales increased 2.2%, while traffic increased 2.1%.

We’re Hiring Banner, Starting Pay $17 Hourly, Target Store, Boston, Massachusetts. (Photo: Getty Images by Lindsey Nicholson/UCG/Universal Images Group)

‘Careful planning of our business’

Looking ahead to fiscal 2023, Cornell said the retailer will focus on its long-term strategy and “continue to differentiate through affordability, assortment, simplicity and convenience.”

“At the same time, we are carefully planning our business to ensure we remain agile and responsive to the current operating environment. In the coming year, we will continue to make strong capital investments and performance opportunities to support our long-term growth.”

For the first quarter of 2023, the company expects same-store sales to be broadly flat, with a low-single-digit decline to low-single-digit increase and a 4-5% operating income margin ratio. Adjusted EPS is expected to be between $1.50 and $1.90. In fiscal 2023, the company expects same-store sales to be in the low-single-digit to low-single-digit increase, operating income of more than $1 billion and EPS of $7.75 to $8.75.

Over the next 3 years, the company aims to surpass its pre-pandemic operating income margin rate of 6%, and says it could reach that goal in fiscal 2024 “depending on the pace of recovery in the economy and consumer demand.”

Brooke DePalma is a Yahoo Finance reporter. Follow her on Twitter at @Brooke DePalma Or send an email to [email protected].

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