Target Corp. has its mojo working on the bottom line, but has a little more work to do to drive sales in a dicey consumer environment.
The discounter’s net profits for the fourth quarter increased 57.8 percent to $1.4 billion from $876 million a year earlier.
That put earnings per share at $2.98 — 56 cents better than the $2.42 analysts projected, according to FactSet.
Target has been working hard to boost the bottom line to help get it over a rough patch in sales to its cost-sensitive customer base.
The gross margin rate rose to 25.6 percent from 22.7 percent a year earlier, which the company attributed to “lower markdowns and other inventory-related costs, lower freight costs, lower supply chain and digital fulfillment costs, and favorable category mix.”
But revenues for the three months ended Feb. 3 inched up just 1.7 percent to $31.9 billion from $31.4 billion, even with the most-recent quarter including an extra week compared with a year earlier.
Comparable sales fell 4.4 percent in the quarter, including a 5.4 percent drop at stores and a 0.7 percent decrease in digital sales.
But Target pointed to a big swing upward in digital comp sales, which were down 6 percent in the third quarter.
Same-day services — including in-store pick up, drive up and its Shipt business — represent more than 10 percent of the company’s total sales and were up by 13.6 percent in the quarter.
Footfall in stores is improving, but still has a bit to go to get back to positive.
Traffic was down 1.7 percent year over year in the fourth quarter, a much better showing than the 4.1 percent decline in the third quarter.
“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 Brian Cornell, chairman and chief executive officer, in a statement.
“Throughout the season, guests responded to newness, value and the inspiration and ease of our in-store and digital shopping experience,” Cornell said. “Looking ahead, we’ll continue to invest in the strengths and differentiators that have delivered strong financial performance over time.”
The company did not break out sales of discretionary items like apparel — which has been a weaker spot at Target and for many retailers — but again called out newer offerings like its Kendra Scott jewelry and Fenty Beauty by Rihanna.
And Target plans to keep offering shoppers new things, like the recently released limited-time collection with Diane von Furstenberg featuring more than 200 items across women’s, girls, baby, beauty and home decor.
