Target on Tuesday reported mixed fourth-quarter results but forecast a modest sales rebound and a better-than-expected profit for this year, as the retailer, under its new CEO, tries to breathe new life into its stores and catch up with its bigger, tech-focused rivals.
The results arrived in tandem with Target's (TGT) analyst day on Tuesday, as the chain tries to generate excitement about its new CEO, Michael Fiddelke, who took over last month. Fiddelke's appointment was met with some skepticism on Wall Street, following weaker sales over the past few years amid an affordability crunch that has made rivals Walmart (WMT), Costco Wholesale (COST) and Amazon.com (AMZN) more popular with shoppers.
Target also reported its quarterly numbers Tuesday as Wall Street tries to gauge the impact of the attacks on Iran from Israel and the U.S. over the weekend and the Supreme Court's ruling against President Donald Trump's emergency-powers tariffs.
With fiscal fourth-quarter profit showing a surprise increase from a year ago, and the company's upbeat full-year outlook, the stock jumped 3.7% in premarket trading, putting it on track to open at a one-year high.
For the current fiscal year, the retailer said it expects to earn $7.50 to $8.50 a share. The midpoint of that range was well above FactSet's estimate for $7.63.
Target expects sales gains this year of roughly 2% from a year ago, compared with analysts' estimates for growth of around 1.8%. The gains reflect expectations for a slight increase in same-store sales, new stores and gains in "non-merchandise" sales - or sales made from things like Target's digital advertising business, which charges brands to advertise their products within the retailer's online ecosystem.
Management said it expects sales to increase in every quarter of the year. Fiddelke, in a statement, said the chain had a "healthy, positive sales increase in February, serving as an important milestone on our path back to growth this year."
For the year ending Jan. 31, sales declined 1.7% to $104.8 billion, marking a third-straight yearly decline.
Higher costs of living have steered shoppers toward groceries and household essentials, while bigger retailers like Walmart and Amazon have been able to keep prices lower. In the process, they've spent less on the clothing, accessories and home decor that Target depends on. Analysts have said reviving sales for those categories would be crucial to Target's turnaround.
Target is also trying to reignite its reputation as a destination for style and value, refreshing store displays, as well as some of its own store brands in the process. As with Walmart, Target is also trying to dive further into e-commerce, digital advertising and artificial intelligence.
Adjusted fourth-quarter earnings per share rose to $2.44 from $2.41, while the FactSet consensus called for a decline to $2.16.
Sales for the latest quarter, which encompassed the key holiday-shopping period, were $30.45 billion, down 1.5%, with same-store sales down 2.5%. Analysts were expecting sales of $30.46 billion and a same-store sales decline of 2.4%, according to FactSet.
However, Target said sales and store traffic improved during the last two months of the fourth quarter. Demand for groceries, beauty products and toys helped sales during the quarter, as did gains in membership revenue and digital advertising.
As of Monday's close, Target's stock was down 6.3% over the past 12 months, while shares of Walmart have soared 30.2% and the S&P 500 index SPX has advanced 17.6%.