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Target stock jumps 12%, CEO says retailer will get back to growth mode

Target (TGT) is aiming to hit more bull's-eyes in 2024 after a series of challenges last year.

"We'll be talking about our roadmap for growth, getting Target back to being a growth company, from a comparable sales standpoint, from a traffic standpoint, and from a [market] share standpoint," Target chairman and CEO Brian Cornell told Yahoo Finance ahead of a closely watched investor day in New York City on Tuesday.

Cornell says Target will spend 2024 opening new stores, remodeling existing locations, introducing private-label brands, and unveiling a membership program that features faster delivery times and other perks.

The company reported higher sales, gross profit margin, and earnings per share for Q4 compared with a year ago, with all three metrics beating analyst estimates. However, its same-store sales are down year over year.

Shares of Target rose 12% after the earnings release.

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"We think F4Q results and guidance were better-than-feared. Guidance anticipates a sequential improvement through F2024. This is largely consistent with our expectations that discretionary spending intentions are improving, including amongst lower income households," said Stifel analyst Mark Astrachan in a note to clients.

The promise of growth comes after a tough 2023 for the discounter.

The company struggled with sales declines and market share loss in food and discretionary items to rival Walmart (WMT) and even dollar stores. Blame that on the stubbornly high inflation and a perception some have that Target is pricier than the competition.

Discretionary merchandise departments such as apparel and home goods — important sales drivers for Target — were under pressure throughout the year, resulting in more cautious shoppers.

However, Target managed to preserve its profit margins by shedding $500 million in expenses, part of a $2 billion cost-cutting plan.

Target's stock fell 4.4% in 2023, lagging the S&P 500's 24% gain. Walmart shares rose 12.3%, while Costco (COST) increased 42.5%.

Target will ramp up its value messaging to consumers this year, in part fueled by the introduction of private-label brands, Cornell explained.

Here's how Target's earnings stacked up.

The earnings rundown

  • Net sales: +1.7% year over year to $31.9 billion, vs. estimates for $31.38 billion

  • Gross profit margin: 25.6% vs. 22.7% a year ago, vs. estimates for 25%

  • Diluted EPS: +57.6% year over year to $2.98, vs. estimates for $2.40 (guidance: $1.90 to $2.60)

  • Comparable sales: -4.4% year over year (last year it rose 0.7%):

    • Digital comparable sales: -0.7%

    • Store comparable sales: -5.4%

What else caught our attention

New York, NY USA - September 27, 2023 : People walking in front of the facade and entrance of the Target store on the second floor of the East River Plaza shopping mall in East Harlem, New York City
People walking in front of the facade and entrance of the Target store on the second floor of the East River Plaza shopping mall in East Harlem, New York City. (MDoculus via Getty Images) (MDoculus via Getty Images)
  • Inventory fell 12% from the prior year.

  • The company once again didn't repurchase any of its stock in the quarter, despite having $9.7 billion left on a prior buyback authorization. Cornell told Yahoo Finance the company may look to begin repurchasing its stock again in the second half of this year.

  • Both the number of transactions and average check size declined in the quarter.

  • Target ended the year with almost $4 billion in cash.

  • First quarter earnings per share are projected to be $1.70 to $2.10, vs. estimates for $2.09.

  • Full-year earnings per share are projected to be $8.60 to $9.60, vs. estimates for $9.15.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.

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