Target ends a strong fiscal 2018 with an upbeat forecast

Target Corp. has closed the books on one of its strongest years in over a decade amid a stellar holiday season and ongoing investments in its offers, stores and digital.

For the full year, Target’s total same-store sales increased 5%, the strongest growth since 2005. Online sales surged 36%. It was the fifth consecutive year that Target reported comparable digital-sales growth of more than 25%.

Net earnings fell 26.5% to $799 million, or $1.52 per share, for the fourth quarter, ended Feb.2, from $1.09 billion the prior year. (A 53rd week in fiscal 2017 contributed to the results.) Adjusted earnings were $1.53 per share, a penny better than analysts expected.

Commenting on Target’s results, Neil Saunders, managing director of GlobalData Retail, noted that part of the chain’s net income decline was due to the shorter trading period, and a part of it reflects a much higher income tax provision.

“While we believe increased costs in a number of areas, including wages, also took their toll they were offset by higher volumes and some good margin gains on own brand products,” Saunders said. “When all of this is considered, the bottom line outcome is respectable and should give Target the confidence to continue investing at pace.” For more analysis, click here.

Target’s revenue for the quarter totaled $22.98 billion, essentially flat with last year, beating the $22.96 billion analysts had forecast. Total comparable sales, which include online, rose 5.3%, more than expected. Same-store brick-and-mortar sales rose 2.9%, while online sales were up 31%.

The number of overall transactions at Target rose 5.3% during the fourth quarter, compared to 3.6% in the year-ago period. The average transaction amount was up 0.8%, compared to 0.4% last year. Traffic rose 4.5%.

“Thanks to the dedication of Target's team, we delivered our strongest traffic and comparable sales growth in well over a decade, and our 2018 Adjusted EPS set a new all-time record for the company," said Brian Cornell, chairman and CEO of Target Corp. "We have been driving an ambitious agenda to transform our company, evolve with our guests and drive strong growth. On every count we've been successful, and as we enter 2019, we will continue to lead the industry by adapting, innovating and delivering more for our guests and shareholders."

Target said it expects 2019 per-share earnings of $5.75 to $6.05, easily topping Street projections of $5.61.