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Target Q4 earnings beat analysts' forecasts across the board, skips 2021 guidance

Brian Sozzi
·3-min read

Another quarter in which Target (TGT) hit the bull's eye is in the books.

The discount retailer thumped analyst forecasts across the board on Tuesday as consumers continued to consolidate their purchases with their favorite retailers during the COVID-19 pandemic and cashed in stimulus checks. Target's fourth quarter 2020 store comparable sales rose 6.9%, while comparable digital sales spiked 118%. Both metrics did show deceleration in terms of growth rates versus the third quarter, however.

"Following years of investment to build a durable, scalable and sustainable business model, we saw record growth in 2020, as our guests turned to Target to safely provide for their families throughout the pandemic," Target Chairman and CEO Brian Cornell said in a statement.

Here's how Target performed in the fourth quarter of 2020 versus Wall Street estimates.

  • Net Sales: $27.9 billion vs. $27.43 billion

  • Comparable Sales: +20.5% vs. +17.5%

  • Gross Margin: 26.80% vs. 26.31%

  • Operating Margin: 6.50% vs. 6.05%

  • Adjusted Diluted EPS: $2.67 vs. $2.49

lf Target is to be dinged on its earnings day, it's the lack of an earnings outlook for 2021. Retailers such as Macy's and Best Buy have come out in recent weeks with sales and profit outlooks as a tiny bit of normalcy begins to return to consumer spending amidst the pandemic.

Target remains extra cautious.

"In the face of continued uncertainty, the company is not providing sales and EPS guidance for Fiscal 2021 and beyond," Target said.

Photo by: STRF/STAR MAX/IPx 2020 8/19/20 Target posts fastest sales growth ever wtih profits jumping 80% setting same-store sales record.
Photo by: STRF/STAR MAX/IPx 2020 8/19/20 Target posts fastest sales growth ever wtih profits jumping 80% setting same-store sales record.

The company is likely to comment on current business trends at its investor day later on Tuesday. Several retailers including the aforementioned Macy's and TJX Companies have struck a bullish tone on year-to-date consumption, in large part because of stimulus check spending.

Nevertheless, it's unlikely the absence of 2021 guidance will shake the bull case on Target in the near-term. The company is viewed on the Street as a market share gainer during the pandemic that stands to keep its momentum (though to a lesser extent) once the world reopens.

"We believe Target remains a long-term winner. It will participate in the rebound in apparel and beauty spending (~27% of sales and helping against gross margin comparisons), and we believe its broad assortment spanning discount-priced consumables to cheap-chic apparel and home (e.g., see latest collaboration with Levi’s) will enable the company to retain many of the customers it acquired during the pandemic," said JPMorgan retail analyst Christopher Horvers ahead of Target's earnings.

Added Horvers, "Moreover, a potential stimulus driven spending lift should ease the tough comp lap ahead while high savings rates, improving lower income employment, and millennium household formation portend a strong top line backdrop for Target this year."

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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