Target Q4 Results Top Estimates; Sees Q1, FY23 Earnings Below Market

target sept13 28feb23 lt

Discount retailer Target Corp. reported Tuesday weak earnings in its fourth quarter, while adjusted earnings and top line beat market estimates. Looking ahead, the Minneapolis-based company projects earnings for the first quarter and fiscal 2023 below the Street view.

In pre-market activity on the NYSE, Target shares were gaining around 3 percent to trade at $171.71.

Brian Cornell, chairman and chief executive officer, said, "We're pleased that our business delivered comparable sales growth in the fourth quarter, in what continues to be a very challenging environment... we're planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment."

For the first quarter, Target expects earnings on a reported and adjusted basis to range from $1.50 to $1.90 per share, and an operating income margin rate of 4 to 5 percent. Comparable sales would be in a wide range, from a low-single digit decline to a low-single digit increase.

On average, 25 analysts polled by Thomson Reuters expect the company to earn $2.14 per share for the first quarter. Analysts' estimates typically exclude special items.

For fiscal 2023, the company expects earnings on a reported and adjusted basis to range from $7.75 to $8.75 per share. Analysts expect the company to earn $9.23 per share for the year.

Operating income is projected to grow more than $1 billion. Comparable sales for the year would be in a wide range from a low-single digit decline to a low-single digit increase.

In fiscal 2022, earnings were $5.98 per share and adjusted earnings were $6.02 per share, on total revenue of $109 billion. Comparable sales grew 2.2 percent, and comparable traffic grew 2.1 percent

Over the next three years, Target expects its operating income margin rate will reach, and begin to move beyond, its pre-pandemic rate of 6 percent. Operating income margin rate of 6 percent is expected to reach as early as fiscal 2024, depending on the speed of recovery for the economy and consumer demand.

In its fourth quarter, Target's net earnings came in at $876 million or $1.89 per share, down 43.3 percent from $1.54 billion or $3.21 per share last year.

Adjusted earnings were $1.89 per share for the period, compared to $3.19 in 2021. Analysts expected the company to earn $1.40 per share for the quarter.

Operating income was $1.2 billion, down 44.7 percent from $2.1 billion a year ago.

Total revenue of $31.40 billion grew 1.3 percent in the quarter from $31 billion last year. Analysts expected revenues of $30.72 billion for the quarter.

The revenues were driven by sales growth of 1.2 percent from last year to $30.98 billion, and an 8.4 percent increase in other revenue.

Total comparable sales grew 0.7 percent in the fourth quarter, on top of 8.9 percent growth last year, driven entirely by an increase in guest traffic. Comparable stores sales growth was 1.9 percent, while comparable digital sales declined 3.6 percent.

Same-day services, i.e., in-store pickup, Drive Up, and Shipt, which represent more than 10 percent of total sales, increased 4.3 percent in the quarter.

The company noted that strength in Food & Beverage, Beauty and Household Essentials offset ongoing softness in discretionary categories.

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